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·        Want to set prices for one or more products or services,

·        Want to do it as quickly as possible,

·        Want every penny of profit you can get, and

·        Can’t afford a pricing consultant,

… then until today you had no choice but to lose money!

Before the publication of HOW TO SET PRICES FOR MAXIMUM PROFITS, you would have fallen back on one of two methods used by companies which do not or cannot hire a pricing consultant. And both of these methods are pretty much guaranteed to lose you money!

Two price-setting methods guaranteed to lose you money

 You (and your competitors) are likely using one of these methods – both of which flush profits down the drain:

1.     Add a fixed amount of “profit” to your costs (called “cost-plus” pricing)

2.     Match or charge slightly less than your competitors.

How can you lose money with these two strategies? See the details below. But… here’s the good news. Your competitors (unless they have the bucks for a pricing consultant) are probably using one of these two methods to set their prices. That means you can easily do better than them. And unless they find out about this workbook, they won’t be able to figure out how you do it!

 1.     How you can LOSE money by adding a fixed % of profits to your costs

This one sounds so seductive, doesn’t it? Your costs are, say, $10, so you add 15% for profit and price at $11.50. You can’t lose!

But there are two different ways you CAN lose – and lose big! – with this strategy.

1.     Your costs probably change depending on how many you sell.

·    If your $10 costs depend on you buying 1,000 units of materials each quarter, and you don’t sell enough – you’ll have to buy in lower quantities. That means your costs may jump up to $11 or $12. Enough to cause you to actually LOSE money with your so-called “guaranteed” profit.

·    When you launch a new product or service, the number you’re most likely to get very wrong is the number of units you will sell. Nobody really knows what it will be. Which means your “guaranteed” profit is a fantasy.

2.      Your price doesn’t account for the value consumers place on your product

·    Suppose you sell as many as you thought, so your costs really are $10 and you’re making $1.50 with every unit you sell. Are you a winner? Maybe. Maybe not. What if consumers were perfectly willing to pay $14 for your product? That would mean you’re throwing away $2.50 on every product you sell.

·    Worst of all, you have no way of discovering this. So you’ll continue to keep throwing away the money – for as long as you sell the product!

Warning: This “cost plus” pricing strategy is especially attractive to people with a finance background. If a finance person is setting your prices, print out this page and show it to them to explain why this is a bad idea!

One Exception! There’s only one type of business that should use cost-plus pricing – a business that does only custom work. If every job/product/service you do is custom tailored to the buyer, then you must use cost-plus pricing.

2. How you get hurt matching (or undercutting) your competitors’ prices

This is actually a better strategy than the previous one. But it can still lose you serious money. Here’s how:

If you match your competitors’ prices

This strategy doesn’t account for the differing values customers place on different versions of a product or service. So you can’t be rewarded with all the profits you deserve for your differences.

Example: your product or service is bound to have at least 2 or 3...

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