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Deciding how much to charge for something is usually one of the most difficult things to do well.  There are three main types of pricing: Cost Plus, Market Based and Value Based. In many cases, it is possible to mix and match.

The 5 Sentence Splash

Market-Based Pricing is all about understanding what is the going rate for a similar service to your own.  When you know what range of pricing your competition is using, you can choose where in that range you would like to target.  This works the best in markets where there is a decent amount of competition and you are able to gather information on competitive pricing.  For this exercise, we’ll be using a pricing ladder to graphically display the competitive market pricing landscape.

How To:

The first step is to see if you can collect pricing information on similar industries to your own. The majority of this can be done with online searching.  You should know your industry well enough to have an idea who you should be benchmarking for pricing and how your product offerings stack up against your competition.

Template:

This is a Pricing Ladder template.  Simply place your market researched items and prices into the orange cells and the worksheet will automatically plot them in order on the single axis chart.


Pricing Ladder Download

Think it Through

When you have your results in, you need to consider the competitive advantages and disadvantages that may justify having your price be higher or lower than the others on the market.  You don’t necessarily want to be the lowest price on the market.  That tends to make your customers wonder what’s wrong with your product.  If you want to be the highest priced product on the market, you really need to have a solid case for being the most expensive.

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