Make Your Price Sell!, The Masters Course | Page 6

the price? Simple… SiteSell
recognizes the value of a lifetime customer in a competitive market.

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Frankly, SBI! is too good to be a high-volume, low-price product. We
price it an affordable level but not too low. This bypasses a “too
good to be true” sentiment. And yet it's still, by far, the best small
business bargain on the Net.
Take the tour and see for yourself how easy it is to use SBI! …
http://videotour.sitesell.com/
3) Freeze-out -- this is a variant of great product. You offer an “introductory low
price” for a product that is a recurring purchase for a customer. That first sale
effectively sticks him to you, not your competitor... if the quality is there, of course.
Offline example -- Buying a long term membership in one gym, keeps you from
joining another one. You don’t join two gyms. Also, magazines -- most people
purchase Time or Newsweek, not both.
Online example -- Web hosting services often offer low “first year” rates to take
customers out of their competition’s hands. Then as long as they offer good Web
hosting, customer stickiness takes over.
What’s the bottom line?
If you want to establish dominance in the market for any reason, price to penetrate...
even if it means you have to accept low or no profit margins.
This pricing technique, referred to as “buying market share,” comes at a “cost”, no
doubt about it. You are foregoing the additional profits of a higher price to “buy” this
larger percentage of the market.
There is one school of thought in marketing that says that “market share
dominance” is the most important factor in the marketplace. The Net raises the bar
to alpine levels...
If you’re pricing high on the Net, you better have a unique and patented product.
Even then, you’re begging for someone to attack you with vicious price-cutting.
Model #2 Top Pricing
The opposite strategy to penetration is top pricing. Here the price is deliberately
set high in order to reap large profit margins. This is usually at the cost of failing to
capture a large number of customers.
The most valid reason to use this price strategy? You are launching a hard good
that is radically new and significantly better than the competition, and you have strong
patent protection. The high price attracts and does not deter “pioneers.” This
strategy helps to recoup your capital costs.
Who, or what, are...

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... pioneers?
They are people who want something that nobody else has yet. Pioneers are not
afraid to be “first” or “unique” -- actually, it’s a badge of honor to be “first one on the
block.” They are not particularly concerned about price. Often, to their way of
thinking, high price indicates quality.
Such must-have, open-wallet customers are your best friends. If you can equate
uniqueness and quality with your price statement, substantial profit will surely follow.
In the short term, you receive a good income from the high-priced product.
But...
Long term, this comes at the cost of establishing a powerful position in the market
by dominating market share (i.e., percentage of the customers). So don’t stick with
this strategy forever.
High prices tend to attract competitors. They see your big, fat profit margins. They
know they can offer a similar product, at a much lower price than you are doing, and
still take home a fair penny.
High price tactics are also known as “selling off market share.” You gain income
from those high profit margins, in exchange for having a smaller and smaller
percentage of the market buying your product.
There are other valid reasons for top pricing, besides “pioneer pricing.” For
example...
Luxury pricing… You make a top quality product, among the very best of its kind
on the market. You are able to create a certain “luxury cachet,” building a high
perceived value. You accept smaller unit-sales in return for higher margin. To thrive
long term, of course, you must continue to offer a “best of breed” product and
maintain the luxury image.
Pricing a service… If you offer professional services, you may find it preferable to
cater to a small number of high-paying clients. Of course, you have to be able to
“walk the walk.” A diametrically opposite strategy for your same service would be to
offer a “cookie-cutter” service to “the mass market” at a much lower price.
Offline example -- Apple sold the Macintosh computer (with its unique-at-the-time,
user-friendly graphic interface) for years, at prices that were $1,000-$1,500 above
that of the PC clones. In the long run, though, their lowered sales volume allowed
IBM and its clones to become the industry standard. Mac almost died as a result.
Offline example -- The DVD. Pioneers covered the R&D costs and delivered fat
profits. Over the years, the DVD became fiercely competitive and prices
evaporated. Today, it’s a commodity.

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Offline example -- Mercedes