6 Different Pricing Strategies: Which Is Right for Your Business?
It’s no secret that small businesses play a vital role in the US economy. However, most non-employer small businesses average just $44,000 a...
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It’s no secret that small businesses play a vital role in the US economy. However, most non-employer small businesses average just $44,000 a year in annual revenue, with many of these companies earning $25,000 or less. While various factors can affect a business’ revenue potential, one of the most important is the pricing strategy utilized by its owners.
Good pricing strategy helps you determine the price point at which you can maximize profits on sales of your products or services. When setting prices, a business owner needs to consider a wide range of factors including production and distribution costs, competitor offerings, positioning strategies and the business’ target customer base.
While customers won’t purchase goods that are priced too high, your company won’t succeed if it prices goods too low to cover all of the business’ costs. Along with product, place and promotion, price can have a profound effect on the success of your small business.
Here are some of the various strategies that businesses implement when setting prices on their products and services.
1. Pricing at a Premium
With premium pricing, businesses set costs higher than their competitors. Premium pricing is often most effective in the early days of a product’s life cycle, and ideal for small businesses that sell unique goods.
Because customers need to perceive products as being worth the higher price tag, a business must work hard to create a value perception. Along with creating a high-quality product, owners should ensure their marketing efforts, the product’s packaging and the store’s décor all combine to support the premium price.
2. Pricing for Market Penetration
Penetration strategies aim to attract buyers by offering lower prices on goods and services. While many new companies use this technique to draw attention away from their competition, penetration pricing does tend to result in an initial loss of income for the business.
Over time, however, the increase in awareness can drive profits and help small businesses to stand out from the crowd. In the long run, after sufficiently penetrating a market, companies often wind up raising their prices to better reflect the state of their position within the market.
3. Economy Pricing
Used by a wide range of businesses including generic food suppliers and discount retailers, economy pricing aims to attract the most price-conscious of consumers. With this strategy, businesses minimize the costs associated with marketing and production in order to keep product prices down. As a result, customers can purchase the products they need without frills.
While economy pricing is incredibly effective for large companies like Wal-Mart and Target, the technique can be dangerous for small businesses. Because small businesses lack the sales volume of larger companies, they may struggle to generate a sufficient profit when prices are too low. Still, selectively tailoring discounts to your most loyal customers can be a great way to guarantee their patronage for years to come.
4. Price Skimming
Designed to help businesses maximize sales on new products and services, price skimming involves setting rates high during the introductory phase. The company then lowers prices gradually as competitor goods appear on the market.
One of the benefits of price skimming is that it allows businesses to maximize profits on early adopters before dropping prices to attract more price-sensitive consumers. Not only does price skimming help a small business recoup its development costs, but it also creates an illusion of quality and exclusivity when your item is first introduced to the marketplace.
5. Psychology Pricing
With the economy still limping back to full health, price remains a major concern for American consumers. Psychology pricing refers to techniques that marketers use to encourage customers to respond on emotional levels rather than logical ones.
For example, setting the price of a watch at $199 is proven to attract more consumers than setting it at $200, even though the true difference here is quite small. One explanation for this trend is that consumers tend to put more attention on the first number on a price tag than the last. The goal of psychology pricing is to increase demand by creating an illusion of enhanced value for the consumer.
6. Bundle Pricing
With bundle pricing, small businesses sell multiple products for a lower rate than consumers would face if they purchased each item individually. Not only is bundling goods an effective way of moving unsold items that are taking up space in your facility, but it can also increase the value perception in the eyes of your customers, since you’re essentially giving them something for free.
Bundle pricing is more effective for companies that sell complimentary products. For example, a restaurant can take advantage of bundle pricing by including dessert with every entrée sold on a particular day of the week. Small businesses should keep in mind that the profits they earn on the higher-value items must make up for the losses they take on the lower-value product.
Pricing strategies are important, but it’s also important to not lose sight of the price itself. Here are five things to consider, alongside your strategy, when pricing your products.
TELL ME ABOUT YOURSELF?
This is one of the first questions you are likely to be asked. Be prepared to talk about yourself, and why you're an excellent fit for the job. Try to answer questions about yourself without giving out too much, or too little, personal information. You can start by sharing some of your personal interests and experiences that don't relate directly to work, such as a favorite hobby or a brief account of where you grew up, your education, and what motivates you. You can even share some fun facts and showcase your personality to make the interview a little more interesting.
If it feels daunting to generate this information from scratch, you can rely on a simple formula to construct your answer. The ‘present-past-future’ formula is a way to share key background points while ending on a high note. Begin with a brief overview of where you are now (which could include your current job along with a reference to a personal hobby or passion), reference how you got to where you are (here you could mention education, or an important experience such as a past job, internship or volunteer experience) and then finish by touching on a goal for the future.
Bonus points if you’re able to identify how the position you’re applying for aligns with how you envision your future.
Remember to be careful about what you include in your answer – avoid potentially contentious subjects such as political or religious leanings, unless you are absolutely positive that your opinions would be well-received by your interviewer. You should also avoid talking too much about family responsibilities or hobbies that might make your interviewer wonder whether you could commit yourself 100% to the job.
No matter how you choose to respond, write out your answer in advance and then read it aloud to ensure it sounds natural. Try to keep it short and sweet, as you don’t want to come across as the type of person who endlessly drones on about themselves.
WHAT ARE YOUR GREATEST PROFESSIONAL STRENGTHS?
When answering this question, interview coach Pamela Skillings recommends being accurate (share your true strengths, not those you think the interviewer wants to hear); relevant (choose your strengths that are most targeted to this particular position); and specific (for example, instead of “people skills,” choose “persuasive communication” or “relationship building”). Then, follow up with an example of how you've demonstrated these traits in a professional setting
Tips to answer this question:
+ Grab hold of the opportunity this question gives you. This question really lets you guide the interview where you want it to go. This your chance to relate your most impressive success story, so take advantage!
+ Highlight a strength that is crucial to the position. (As I mentioned earlier)
+ Find out from your company research and from the job description what strengths the company puts a lot of stock into.
+ Don’t make claims that you can’t illustrate with a brief example or fact.
+ Don’t be overly modest but don’t claim to be Superman or Superwoman either.
+ Don’t name a strength that is irrelevant to the job at hand.
WHAT ARE YOUR WEAKNESSES?
"What are your weaknesses" is one of the most popular questions interviewers ask. It is also the most dreaded question of all. Handle it by minimizing your weakness and emphasizing your strengths. Stay away from personal qualities and concentrate on professional traits: "I am always working on improving my communication skills to be a more effective presenter. I recently joined Toastmasters, which I find very helpful."
Tips to answer this question:
+ Show that you are aware of your weakness and what you have done to overcome it.
+ Show that you are “self-aware” and that you have the ability to take steps to improve yourself.
+ Don’t you DARE answer with the cliche “I’m a perfectionist” answer or any other such answer that the hiring manager can see right through.
+ Don’t highlight a weakness that is a core competency of the job. (Know the job description “inside and out”.)
+ Don’t dodge this question.
WHY DID YOU LEAVE (OR WHY ARE YOU LEAVING) YOUR JOB?
If an interviewer asks, "Why did you leave (or why are you leaving) your job?" and you're unemployed, state your reason for leaving in a positive context: "I managed to survive two rounds of corporate downsizing, but the third round was a 20% reduction in the workforce, which included me."
If you are employed, focus on what you want in your next job: "After two years, I made the decision to look for a company that is team-focused, where I can add my experience."
Tips to answer this question:
+ If it was because you left voluntarily then reference a specific characteristic that the company you are interviewing for has that you are attracted to. One that your previous employer didn’t have.
+ If you were let go, be honest and explain the situation and own it. Explain what you learned from the experience, because the interviewer knows you’re human, you make mistakes, and just wants to see that you were able to do something about it
+ Words like “downsizing” and “budget cuts” and “bad economy” are good defenses if they are true and are the reasons for departure from the job.
+ Don’t bash your last company or boss or anything along those lines.
+ Don’t say, “It’s time for a career switch and I’d like to try my hand at the job you are offering” or “I’m tired of doing the same old thing.” Give a pointed, Positive reason for why you want to head off in a new direction.
+ Don’t lie if you were fired.
WHAT IS YOUR GREATEST PROFESSIONAL ACHIEVEMENT?
Nothing says “hire me” better than a track record of achieving amazing results in past jobs, so don't be shy when answering this interview question! A great way to do so is by using the S-T-A-R method: Set up the situation and the task that you were required to complete to provide the interviewer with background context (e.g., “In my last job as a junior analyst, it was my role to manage the invoicing process”), but spend the bulk of your time describing what you actually did (the action) and what you achieved (the result). For example, “In one month, I streamlined the process, which saved my group 10 man-hours each month and reduced errors on invoices by 25%.”
Tips to answer this question:
+ Talk about an accomplishment that exhibits how you will be a perfect fit for the company and for the position you’re interviewing for.
+ Try and show some genuine passion when you’re talking about your accomplishment.
+ Don’t fall into the trap of thinking your accomplishment is “too small”. The fact is, relating a small accomplishment that is inline with “what the company values” can be more powerful than an unrelated accomplishment. (Remember: “It’s not about you, It’s about them.”)
WHERE DO YOU SEE YOURSELF IN FIVE YEARS?
If asked this question, be honest and specific about your future goals, but consider this: A hiring manager wants to know a) if you've set realistic expectations for your career, b) if you have ambition (a.k.a., this interview isn't the first time you're considering the question), and c) if the position aligns with your goals and growth. Your best bet is to think realistically about where this position could take you and answer along those lines. And if the position isn’t necessarily a one-way ticket to your aspirations? It’s OK to say that you’re not quite sure what the future holds, but that you see this experience playing an important role in helping you make that decision.
Tips to answer this question:
+ Demonstrate when you answer the question your level of commitment to the position they are interviewing you for.
+ After you have demonstrated your commitment to the role you are interviewing for, outline a realistic growth strategy that is directly tied to the role you’re in and the needs and values of the company.
+ Stress your interest in a long-term career at the company.
+ Don’t exhibit ambition to the point of seeming like this particular job is just a “brief stepping stone” for you. You need to show commitment.
+ Don’t say you want to be CEO of the company in 5 years.
+ Don’t say “Actually I want to be in YOUR seat within the next 5 years.” to the hiring manager.
WHY SHOULD WE HIRE YOU?
Answer "Why should we hire you?" by summarizing your experiences: "With five years' experience working in the financial industry and my proven record of saving the company money, I could make a big difference in your company. I'm confident I would be a great addition to your team."
Tips to answer this question:
+ Show the hiring manager that you are uniquely suited to filling this position. Be the candidate that solves their “problems“.
+ Show you know some significant details about the company and their general practices because you have researched the firm and are prepared.
+ Tell a “success story” that highlights how you have the ‘qualities’ needed to fill their specific needs.
+ Don’t get discouraged if the hiring manager mentions that “they have lots of very well qualified candidates…” before they lead into this question. (It’s a common “lead in”)
+ Don’t be too modest. This is your chance to shine. Make it count.
+ On the flip side don’t go too overboard and sound too arrogant.
+ Don’t be “wishy-washy” or too general with your answer.
+ Don’t answer with “why” you want the job. Answer with “why you are the perfect fit” for the job.
WHAT DO YOU KNOW ABOUT THE COMPANY?
Any candidate can read and regurgitate the company’s “About” page. So, when interviewers ask this, they aren't necessarily trying to gauge whether you understand the mission—they want to know whether you care about it. Start with one line that shows you understand the company's goals, using a couple key words and phrases from the website, but then go on to make it personal. Say, “I’m personally drawn to this mission because…” or “I really believe in this approach because…” and share a personal example or two.
9. What are your salary requirements?
The #1 rule of answering this question is doing your research on what you should be paid by using sites like Payscale and Glassdoor. You’ll likely come up with a range, and we recommend stating the highest number in that range that applies, based on your experience, education, and skills. Then, make sure the hiring manager knows that you're flexible. You're communicating that you know your skills are valuable, but that you want the job and are willing to negotiate.
HAVE YOU GOT ANY QUESTIONS?
At the end of the interview, it is likely that you will be given the chance to put your own questions to the interviewer.
+ Keep them brief: there may be other interviewees waiting.
+ Ask about the work itself, training and career development: not about holidays, pensions, and season ticket loans!
+ Prepare some questions in advance: it is OK to write these down and to refer to your notes to remind yourself of what you wanted to ask.
It often happens that, during the interview, all the points that you had noted down to ask about will be covered before you get to this stage. In this situation, you can respond as follows:
Interviewer: Well, that seems to have covered everything: is there anything you would like to ask me?
Interviewee: Thank you: I'd made a note to ask about your appraisal system and the study arrangements for professional exams, but we went over those earlier and I really feel you've covered everything that I need to know at this moment.
You can also use this opportunity to tell the interviewer anything about yourself that they have not raised during the interview but which you feel is important to your application:
Don't feel you have to wait until this point to ask questions - if the chance to ask a question seems to arise naturally in the course of the interview, take it! Remember that a traditional interview is a conversation - with a purpose.
TEAMWORK INTERVIEW QUESTIONS:
Now onto the more generic skills, such as your ability to work in a team. No matter how big or small the team is, the hiring manager will want to know that you can develop a strong working relationship with them, as this is essential for productivity and achieving company goals. You may be asked something like the below in order to test if you are a strong team player:
Question: Give an example of team leading in past employment
Answer: You should summarise the task and nature of the group but focus primarily upon your role as team leader. List the personal qualities you possess which made you ideal for leading this team and how you achieved success. Conclude your answer by giving examples of the lessons you learnt while leading this team.
COMMUNICATIONS SKILLS INTERVIEW QUESTIONS:
Your ability to communicate effectively and influence others to act in support of your own and team goals will be examined. An ability to adapt your communication methods depending on situations and individuals is important here.
Question: Provide an example of how you explained a technical concept to a client or co-worker lacking your technical expertise.
How to Answer: Competency based interview questions are meant to determine how well you communicate with others, including your ability to simplify difficult concept. The customer service question about negative feedback is meant to determine whether or not you’re capable of dealing with customer comments that aren’t all that positive in a courteous, constructive manner. With a few of your examples, briefly discuss what you learned from those interactions.
DECISION MAKING INTERVIEW QUESTIONS:
Decision making is a skill that requires the ability to process information and filter this information to ensure you produce a sound and valid decision. You should be able to provide examples of situations where this skill has been tested. Use examples where an obvious answer is not immediately apparent.
Question: Can you tell me about a time when you consulted others when making important project decisions?
How to Answer: You’ll notice that interviewers tend to want specific examples to illustrate your abilities. It’s not unusual for questions to be fairly complex in nature, often involving multiple, related parts. Don’t get overwhelmed. Instead, answer questions one point at at time by providing relevant, easy to digest examples. If you forget the rest of the question, politely ask the interviewer to repeat it.
DRIVE FOR RESULTS INTERVIEW QUESTIONS:
This competency assesses your personal motivation and how you approach challenges.
Question: What is your biggest achievement?
Answer: Ideally, use a work-related example to illustrate your key career achievement. Highlight exactly why you consider it important, with details of the role you played. If your biggest achievement in life is related to your personal life, use commercial references such as budget slashing, determination, commitment and team work to communicate all the associated positive aspects.
PLANNING AND ORGANIZAING INTERVIEW QUESTION:
Auestion: Give me an example of a time when you had to plan a project or a large piece of work.
Tips for Successful Answers:
+ Demonstrate how you have worked in a structured and methodical way.
+ Show real detail about the steps you have taken to plan.
+ Explain how you have amended or flexed the original plans you’d made.
+ Talk about how you built pre-emptive solutions to potential problems
CUSTOMER FOCUS INTERVIEW QUESTION:
Your ability to understand and believe in the importance of customer focus will be tested here. You must display a competency for understanding the difference between internal and external customers.
Question: What about important clients, or complex or sensitive customer relationships?
Answer: If you can show that through your customer service orientation you saved the company from losing something of value (a big client, $X amount of revenue, 20 man hours a week) then you will really demonstrate your customer focus. Or did you save the company a political, organizational, or image problem? Write it out. What was the situation? What action did you take? How did you communicate to your teammates and how did you communicate with the customer? What was the result? … I hope this gets you thinking.
LEADERSHIP INTERVIEW QUESTIONS:
Leadership is a competency employers look for in candidates who are applying for jobs that require them to lead, motivate and/or develop other people, usually team leader and management positions
Question: Describe a time you took a leadership position when you did not have the title of a leader.
Answer: In this question, take an example from a situation where you were in a group and took responsibility to delegate to achieve goals. Show how you gained from the other members to follow your lead and the result of your leadership.
For instance, in college, we were put into groups of four to complete a marketing project. We had to prepare a 15-page paper and 10-minute presentation on a new product. We want to introduce that outside the U.S. I took the initiative among the group to lead a discussion on how we should split up the work when we meet throughout the semester and deadlines for each person’s part of the work. Because I was the one to take the lead the discussion and had a plan in mind, I gained the buy in of the other members quickly. I took everyone’s e-mail address and created a group email to help us all keep track of our progress and so we could help each other outside of class and our meetings. By the end of the semester, my group achieved a 95% on our project.
CONFLICT RESOLUTION SKILL INTERVIEW QUESTIONS:
Conflict resolution skills and the ability to disagree with others professionally and politely are necessary for successful contribution in organizations. If every employee employer hire is willing to engage in conflict resolution, more new ideas and better approaches to solving problems will take place in your organization.
Question: Give an example of a time you handled conflict in the workplace
Answer: Your interviewer will assess your adaptability and gauge the constructiveness of your approach towards conflict, tension and differences of opinion. Your example(s) should highlight the importance of your role in resolving these issues.
CREATIVE SKILLS INTERVIEW QUESTIONS:
Question: Give me an example of your creativity?
Answer sample:
One of my key creative accomplishments occurred in my current job, when I had to increase market share for a new product without increasing our existing marketing budget. I kicked off with some internal brainstorming on how to maximize the use of our resources and be more creative in the way we market. I worked with our two interns, both of whom were creative writing majors, on creating a blog for our website, plus Instagram, Twitter, and Facebook pages for the company’s new product. I tasked the interns with managing the pages, and the three of us came up with relevant content for each social page. The ultimate aim was to create a community of fans and buzz around the new product.
Through product teasers on Twitter, the timely answering of questions on Facebook, and brief video tutorials on Instagram, we grew a fan base of 2,500 people in just three months. When the product was released, first day sales exceeded all expectations, and sales continued on a steady incline for the rest of the year. A lot of the success was attributed to the online fan base we developed, where positive word-of-mouth spurred an influx of customers to purchase the product through the trackable online sales page we created in-house with our design and dev teams.
TIME MANAGEMENT INTERVIEW QUESTIONS:
Question: Explain a time when you were not able to meet a deadline?
Answer: Use an example were you where not able to meet a deadline due to outside factors. For instance, there was a big project that my team was working on, and I had split up the work among some members and myself. During that time, one member of the team had to leave due to their spouse getting a position in another city. He left at a critical time, and I had to re-assign his duties to someone else. I make the new person work to speed with the progression of the project and due to this, was not able to complete it on time. We were still able to complete the project a few days after the deadline even with the change in the team member.
PROBLEM SOLVING INTERVIEW QUESTIONS:
The old adage goes that managers want people who come to them with solutions, not problems, and for me, I couldn’t agree more. The employees who can rise to a challenge and think of innovative ways to solve a problem are the ones who go on to achieve great things both for themselves and the business. Taking this into account, your manager may ask something like:
Question: Give an example of a challenge you faced in the workplace, and how you overcame it
Answer: If you are entering the workplace direct from school, college or university, this question will be geared towards your academic experiences.
Provide a great example of a task that involved using as many skills and abilities as possible. An ideal answer to this question enables you to demonstrate your ability to work in a team, display leadership skills and handle pressure.
