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Is it Time to Raise Prices? Boost your bottom line by taking the guesswork out of pricing.

Is it Time to Raise Prices? Boost your bottom line by taking the guesswork out of pricing. Written by Alison Stein Wellner. Presentation: Prescott Jarrell, Michael Joos BA 499 February 27th, 2012. Fire Eye Company.

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Is it Time to Raise Prices? Boost your bottom line by taking the guesswork out of pricing.

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  1. Is it Time to Raise Prices? Boost your bottom line by taking the guesswork out of pricing. Written by Alison Stein Wellner Presentation: Prescott Jarrell, Michael Joos BA 499 February 27th, 2012

  2. Fire Eye Company • 2004 Young Entrepreneur of the Year Award by Tennessee's small-business administration • Company struggling within • Not enough time • Erratic cash flows • Consistent hiring and laying off • Price Hike • Too high, too low?

  3. Raising Prices • "If you're holding prices steady at a time when they are generally increasing nationwide, you may be surrendering more of your margin than you need to. "This is a very important time for everyone to review their prices," says Brent Lippman, CEO of Khimetrics, a pricing consultancy in Scottsdale, Ariz." • Raising prices does not always mean you will lose customers. • Not raising prices can actually be a disadvantage if everyone else is raising prices.

  4. Don't Rip Yourself Off • When determining your prices: • How much would a rational consumer be willing to pay for your product, assuming the consumer had a perfect understanding of its actual worth? • Increase prices making a customer feel there is a reason (need) for the increase. • Poor example: Netflix • Not showing value to customers for the "price increase"

  5. How Much is Your Product/Service Worth? • Objective Value Vs. Perceived Value • Objective Value: • The most that you could rationally charge for a product. • Perceived Value: • What a person is actually willing to spend on the product. • Somewhere between the actual break-even cost of the product and the objective value of the product. • http://youtu.be/EHtaek38Erg

  6. Setting Prices • Reference pricing: • Shopping competitors prices and setting your price off of their prices. • Reference prices starting at zero are the most difficult to overcome. • Targeting select groups and proving the value in your product above competitors "free pricing" • Failure Example: PS3 Price Cuts • Set prices to maintain profitability with money and resources.

  7. Sell Your Price Increases • Determining your price hike is one thing, selling your price increases is another. • When costs increase, and companies explain the reasoning behind the increase, people usually react better. • Some companies even urge you to increase prices. • "We want you to stick around" • "You're too cheap to be taken seriously" • Raising prices through the back door by getting rid of discounts or fringe benefits can be easier than price increases.

  8. Get the Price you Want • Do not get carried away with discounts to bring in customers. • Control the discounts you offer before they control you. • Grandfathering discounts • Multiple discounts • Customers relying on Discounts • Get the price you want- avert the price war. • Don't be afraid to walk away from low-ball offers. • Your clientele prices can determine your company reputation.

  9. Questions? • Have constant price discounts, or benefits ever influenced you on when to buy a product? • Ex.- Apple offering 'free iPod' with MacBook purchase before school year. • Macy's offering consistent multiple deals. • Do extremely low prices for a product ever make you second guess the product quality? • Compared to that of competitors product prices in the same product category.

  10. References • Wellner, Alison Stein. "Subscribe to • Inc.com's Free Newsletters." Inc.com. Inc.com, 01 July 2005. Web. 25 Feb. 2012. <http://www.inc.com/magazine/20050601/pricing.html>.

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