Pricing Strategy

Pricing Strategy


Pricing Strategy for small businesses and solopreneurs is an important topic. When it comes to looking at pricing and many other aspects of your business its always good to remember, what attracts some people will repel others. That’s okay you’re not in business to please everyone. This is where understanding your target market/ideal client is so very important.

Cost Plus Pricing: Calculating costs, plus marking up a percentage for profit. This is one of the most common pricing strategies in the retail market.

Competitive Pricing: Setting prices based on what the competition charges. Another common pricing strategy, but one that best for pricing identical retail products such dish soap.

Premium Pricing (Higher priced than the competition): The product/service has a distinct competitive advantage. Great effort is made to provide clients with a superior experience. Everything from the promotion to the packaging is luxurious and high quality. Why? Perception matters. Prospective consumers must believe that it’s worth paying a premium for.

Penetration Pricing: Marketers use penetration pricing to gain market share, offering their products/services at a lower price than competitors. This allows them to raise awareness of their products/services. At the same time giving consumers a compelling reason to buy their product and to try it out. This often results in losses for the business at least initially. Once they have met their market share goal they raise their prices to a profitable level.

Bundle Pricing: Selling multiple and similar products together at a lower price than if purchased individually. This increases perceived value in relation to the price point, creating an offer too good to pass up. It also helps to get products that are not selling well off the shelves so new and hopefully better selling products can use the shelf space.

Price Skimming: Little to no competition for a new product/service means high pricing. This is often done to help to offset Research & Development costs and allows businesses to maximize profits until competitors join the market. Prices are then dropped to compete.

Psychological Pricing: is an Awareness and understanding of human behaviour, and our purchasing habits: Is combined with understanding how the brain processes information. The result is a pricing strategy that works. It inspires consumers to purchase based on emotion as opposed to logic.

Value Based Pricing:  This pricing strategy is commonly used for pricing services.

 Hourly Cost + Perceived Value of Service = Price of Service

When looking at the cost per hour portion, don’t forget to consider the following:

  1. In the hour you are providing that service you are not available for other opportunities.
  2. The amount you charge per hour needs to include what you have to pay in income tax (depending on where you live almost half goes to taxes), plus the pro-rated amount for insurance, overhead etc. should also be factored in.

This becomes your base price. Next factor in the value of the service being offered. This can be challenging, because some things you can’t put a price on. However, people have a limit to what they are able to and willing to spend regardless of how life changing the experience is. Knowing your ideal client is key when it comes to knowing what they are willing to spend on the products and services you offer.

Economy Pricing: Low Price/High Volume is a pricing strategy used successfully by large companies such as Walmart. They can negotiate best wholesale pricing due to volume purchases. Smaller businesses simply cannot compete. While this pricing strategy is not recommended for small businesses and solopreneurs I have included it so you can see the full spectrum of pricing strategy options.


Choosing the right pricing strategies for your business is important. A combination of strategies for achieving different objectives should be considered when practical to do so. Pricing is very much a strategy and is a key component of any Business Plan.

Note: The psychology of pricing tells us much about human purchase behaviour, and consumer perceptions. Honestly, ignoring this research would be a costly mistake for any business. It’s a topic that you can be sure we will explore deeply over time at Drunk Squirrels.

Don’t Have A Business Plan?

Don’t Have A Business Plan?

You’ve heard it before, if you don’t have a plan, you have a plan to fail. One of the biggest mistakes seen with online businesses is the casual, laid back approach to business. Many start their online business with a great idea, a social media page and hope for the best.
Its no wonder over the last decade, approximately 80% of new businesses fail in the first 18 months. While the reasons vary, one without question stands out. Failing to plan. The good news is, it’s never to late to develop a business plan. The even better news is that planning doesn’t have to be difficult.
One of the most confusing factors today are buzz words. Two such buzz words are: Business Models, and Strategy. They get thrown around and used interchangeably. They are being used to describe everything related to business. As such, they end up being meaningless.
If you’re getting ready to create your business plan, let’s start by looking at business models.

What is a Business Model?

A Business Model is a company’s plan for generating revenue and making a profit.
Most common Business Models used for online businesses:
Freemium Model: Online businesses that provide a free option of a product/service. This is a restricted version of what that they are selling that is available to everyone. The free experience usually includes things like: ads, account or feature restrictions. This allows everyone to experience their product, and fall in love with it. It builds desire to have access to the pieces that are currently being withheld from them. The goal: Entice customers to buy the full version.
Subscription Model: A popular choice. It’s generally loved by consumers and businesses alike. Netflix is a prime example. Provide high value, and looks after customers and they’re willing to pay a monthly fee. A monthly recurring fee is charged to a credit card. Making renewal each month painless for both sides. This model is great for proving company’s with monthly cash flow.
On-Demand Model: This model relies heavily on technology. Products (e-books, games, courses etc) are available immediately for download upon payment.
Services (coaching, mobile vet, taxi etc.) purchased online trigger a service. That service can be immediate or allows the client to schedule for a future date.
Direct Sales Model: With this on-line model your business creates a physical product. Then the company relies on individuals who are willing to sell your product. The sales associate receives a commission/flexible schedule.
Customization of Goods Model: Your business provides a base product and service. Common products are: t-shirts, mugs, trophies, etc. that are then customized/personalized. Pricing usually is tiered. Base product price + price of customization.
The Marketplace Model: Is one of the biggest and newest business models. This model continues to gain in popularity. Businesses such as: Uber, Airbnb, Etsy use this model. This model does not carry any products or services. Their business is to connect people who provide a product or service, with those who want to buy.
 Which Business Model works best for your type of business? Have you considered combining Business Models as a strategy for multiple income streams?  Next we will look at the role of Strategy in your Business Planning.