It’s no secret that pricing strategy is one of the crucial elements that determine a business’s success. Pricing your services correctly boosts sales, maximizes profits, and sets a solid foundation for business growth.
But getting the pricing right is easier said than done. Pricing is both an art and science—one that involves many factors. That makes pricing a challenge for many retailers.
That is why today will give you the six more commonly used ones to help you identify which choice works best for your Dry Cleaner.
Keystone pricing
Under this method, a product is priced at directly double the wholesale price. The strategy works well, but you need to cover your operating costs. Some companies use the initial price as a base, then apply markups/discounts.
Here’s an easy formula to help you calculate your retail price:
Retail price = [cost of item ÷ (100 – markup percentage)] x 100
For example, if you want to price a product that costs you $20 at a 45% markup instead of the usual 50%, here’s how you would calculate your retail price:
Retail price = [20 ÷ (100 – 45)] x 100 = $36
This strategy works best on small-town retailers because they have less competition and a more loyal customer base.
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Freemium pricing
In these current challenging economic times, freemium comes as a very attractive pricing strategy to retain customers and bring new ones to your business.
Originally a business model, freemium is the ultimate tactic due to its combination of “free” plus “premium”, which makes it so appealing to customers. This strategy functions by offering a free service at first and charging for additional services once the client is hooked. For example, you can offer free delivery if the customer brings 2 or more items to your store.
Psychological pricing
According to Priceintelligently.com. Psychological pricing is the business practice of setting prices lower than a whole number. The idea behind psychological pricing is that customers will read the slightly lowered price and treat it lower than the price actually is.
Pricing something $3.95 instead of $4.00 conveys to the consumer that the product’s price is 3 instead of 4 dollars.
Agile pricing
One of the main pricing strategies nowadays, agile pricing is the smart tactic to adjust or adapt your prices based on the changing market, or even thinking ahead of it.
To apply this strategy, you need to count on a full-time manager that will take charge and make all the corrections when the market changes, allocate resources to implement it, use tools to check and compare competitors’ prices and set up scripts for price changes, but the good news is, that it reliably works!
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Cost-plus pricing
Cost-plus pricing is the simplest strategy to determine your price. You apply a markup percentage, say 20%, to the total cost of producing the service, and this will be your profit. But you have to make sure you have a solid understanding of all the costs and expenses of your business before applying the markup, like direct labor and material cost, and what it costs the company to offer the product or service.
Price Skimming
Price skimming is a product pricing strategy by which you start charging the highest price and then methodically lowering it over time. This strategy is ideal to apply in the introductory phase of a product, allowing the company to generate considerable profits.
Many dry cleaners use a mix of these pricing strategies to:
Of course, pricing your product or service can be tricky. But paying attention to these important factors can make the difference between a profit and a loss.
Once you find the most effective pricing strategy for your Dry Cleaner, you will ensure a better positioning and a greater ability to attract and retain customers.
