Are you facing a dip in your sales?
Do people seem to be buying your product at a sluggish pace?
You’ve likely examined the items you’re selling to see if that might be the root of the problem.
But the issue might actually stem from your pricing.
Setting the right price on your product can be a tricky challenge.
On the one hand, if you set your price too low, you’ll probably sell lots of items, but your profits will be minimal.
Set them too high, though, and you’ll have a nice margin with each sale, but fewer customers will buy your stuff.
You need to hit that sweet spot.
This is where pricing tactics come into play.
If you’re struggling to determine what price to sell your items, or if sales just don’t seem to be taking off like you want, it’s time to examine your pricing strategies.
Let’s take a look at some of the most common pricing tactics along with their advantages and drawbacks.
Some of these you’ve likely heard of before, but others could be new to you.
We’ll also take a look at how upselling can be used within your sales funnel to gain additional profit.
Common Pricing Tactics
1. Cost-based pricing
Cost-based pricing is pretty straightforward.
All you have to do to implement this strategy is to calculate how much an item costs to make.
Then you add to that number based on how much you want to earn from each item sold. This is usually a percentage of the total cost per product.
That additional cost is the markup.
Cost-based pricing is pretty much one of the easiest ways to price your products.
This fast and simple approach is especially useful for online companies which have a wide variety of products for sale.
Pricing with this strategy can also keep a business competitive.
Just because this is the simplest approach doesn’t make it the best for all online companies.
By using cost-based pricing, you may be missing out on additional sales and revenue.
Cost-based pricing also doesn’t take into consideration a host of other factors which we’ll get into in just a moment.
2. Value-based pricing
This differs from cost-based pricing in that it looks into what customers think a product is worth.
When you know what customers are willing to pay for a product, you then set the price at that amount.
There are various ways to determine a price based on value.
One method involves looking at a similar product that a competitor sells and the amount it goes for.
You then see how your product differs and place a value on those differences.
You also get feedback from customers on what they would be willing to pay.
If the value-based price meets customer expectations, you can be sure your sales will do well.
Value-based pricing is a great strategy for companies which offer only a few different products.
It also helps keep you in touch with what your customers want and expect.
This pricing tactic helps educate you on the best ways to sell people on the value of your product.
Simply put, unlike cost-based pricing, value-based pricing requires more work on your part.
You have to study your competitors and keep in touch with your customers.
There’s also the added complication that competitor prices and customer expectations can fluctuate dramatically at times.
That leads to a degree of unpredictability.
3. Price Anchoring
This is one of those pricing tactics that you’ve likely come across but didn’t realize it had a name.
Price anchoring is where you show the customer similar products that have different pricing options.
By giving the customer a range of prices, the lower amounts will appear much more attractive at first.
So let’s say you offer different plans for your customers.
The basic plan would have them paying $10 a month, a boosted plan would be $25 a month, while the deluxe plan is $50 a month.
Based off of those prices, the two lower amounts seem like great deals, and customers may be more willing to buy them.
Customers like to comparison shop, and you’re offering them a chance to do that with the items you offer.
Customers also like options. If you’re giving them options, they’ll have more information to make a purchasing decision.
This pricing tactic doesn’t always work if you have only one or a few products to offer customers.
There’s also the fact that you usually want customers to go for the more expensive items. Price anchoring may steer them in the opposite direction.
That doesn’t mean they can’t go for the more expensive options later, but it does delay the benefit.
4. Freemium Pricing
Using a freemium model is pretty simple — you offer the customer a product or service to start out with for free.
Lots of online companies do this, especially if they offer helpful online tools or software. You can see this through free trials or demos.
The idea is that if the customer gets just a taste of the product, they’ll be eager to pay for more.
ClickFunnels goes with the freemium strategy too. You can give it a try with a free 14 day trial and see for yourself how effective ClickFunnels can be in helping you craft a great sales funnel.
Offering a free trial or demo shows you have a lot of confidence in your product.
You’re basically saying, “I’m so certain you’ll like it, I’m offering it to you at no cost.”
It’s simple. It’s quick. And it’s a great way to get the product into more people’s hands.
Plus, customers love it. 83% of customers say they enjoy getting a product for free.
To be honest, there aren’t many drawbacks to the freemium pricing model.
It’s true some may try to take advantage of it, but for the most part, the advantages vastly outweigh any costs you may take on as a result of it.
5. Price Skimming
Price skimming is the act of putting your new product at a high price and then gradually lowering it over time.
You’ve likely seen this happen particularly when it comes to electronics.
When Apple releases a new iPhone, for example, it usually places a pretty high price tag on it. And yet within a year, the price will come down by quite a bit.
It may sound strange to purposely put a price really high, but it can work when you offer an item that nobody else has.
When your product is unique enough, you can gain from people paying higher prices from the start.
Early adopters will want to get a hold of it right away, while others will wait for the cost to come down.
Price skimming can create buzz surrounding your product, making people sit up and pay attention.
Needless to say, starting off with a higher price can turn some customers off.
The risk you take is that they’ll never return, even when the price goes down.
6. Penetration Pricing
This is pretty much the opposite of price skimming.
Penetration pricing is where you enter a competitive market by setting your items at a lower price than your rivals.
Over time as you gain more market share, you raise your prices to normal levels.
Penetration pricing usually occurs when new companies are just starting out and want to get noticed against already established competition.
What customer doesn’t love lower prices?
Penetration pricing can get a company noticed right away.
As more customers flock to that company, the goal is for them to stick around as prices slowly tick back up.
The drawbacks here should be pretty clear.
Penetration pricing usually happens in an already crowded market, so you’ll be competing intensely for customers right out of the starting blocks.
When offering a product at a super low price, you’re likely taking a noticeable loss.
Large, already established companies can usually power through these drawbacks, but if you’re a small company with limited resources, the disadvantages may be insurmountable.
The Art of the Upsell
One thing to add to these pricing tactics is a strategy that can work independently of price — upselling.
Upselling within ClickFunnels is essentially where you offer an extra item to the customer.
Of course, simply offering them more to buy on its own isn’t always effective.
That’s why you need to offer a product that pairs well with the original item.
Upsells can be an effective way to boost your sales and increase customer satisfaction. They’re also a great way to increase Average Order Value (AOV).
Luckily, adding an upsell step in your sales funnel is easy with ClickFunnels.
All customers have to do is click on the buy button, and it will be added to their order.
There’s no need for them to re-enter their information.
Earn More Through Pricing Tactics and Upselling
By using the right pricing tactics and including upselling, you’ll see an uptick in sales.
Feel free to try out different strategies and see which ones yield the best results.
It won’t be long before you’re moving more product than ever before.
To learn more about pricing strategies within your funnel, make sure you check out this blog post on Funnel Pricing Breakdown.
What pricing tactics have worked best for you? What kind of results have you gotten? Let us know in the comments below.