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By: Josh Miller Adam Opoien

Is It Time To Raise Prices. By: Josh Miller Adam Opoien. Results of a Price Raise. Good: Larger profit Hire more employees Buy new Equipment Work Less (owner) Bad: Alienate longtime customers Close the store. How Prices are currently set. Entrepreneurs respond: “we go by our gut”

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By: Josh Miller Adam Opoien

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  1. Is It Time To Raise Prices By:Josh MillerAdam Opoien

  2. Results of a Price Raise • Good: • Larger profit • Hire more employees • Buy new Equipment • Work Less (owner) • Bad: • Alienate longtime customers • Close the store

  3. How Prices are currently set • Entrepreneurs respond: • “we go by our gut” • Result: Price is low • Cost + (%) margin of profit • Which is great! However, if you set 20% but could make 40% you LOSE! • Competitors price – (%) = Price • Good: if product is identical • Bad: if competitors do not know how to price correctly

  4. Correct way to price • Smart Pricing consist: • Costs • Competitors • Customers • Sales people • The Value of a product or service • How much would a rational consumer be willing to pay for your product

  5. Value • Objective • The most that you could rationally charge for a product • Perceived • What person is willing to spend • Gap between value of product and perceived value

  6. Willing to Pay • Calculator Study • Travel 20 minutes to save $5 • Jacket Study • $125 • People are irrational in purchase decisions

  7. Setting Prices • Reference price • Shop your competitors • Cenedella’s price • $50/month to $25/month • Far from satisfied • Sam Calagione, President of Dogfish Head Craft Brewery • Uses fine wine as reference price • Purposely doesn’t meet demand to create demand • Aligned prices with objective value

  8. Selling Your Price • Fire Eye raised prices by 25% • Sold the increase to his clients • HenkKeukenkamp, CEO of Scope • Product similar to Microsoft • Customers urged him to raise prices • Started at $795 per user per year now at $2,295

  9. Back Door Price Hike’s • Eliminating discounts • Eliminating 2% discount within 30 day payment is easier than raising prices 2% • Start charging add on services that are free • Reduce amount of product but keep price • Dogfish Head sells 4 pack instead of 6 pack

  10. Questions • How do you guys perceive value in products? • Use reference prices? • How much farther are you willing to travel for a product that’s cheaper? • If you were a business would you tell your supplier to rise their prices?

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