Entrepreneur Tool Kit – Pricing Perfected

Pricing Perfected Entrepreneur Tool Kit

Everyone feels the need to be a price leader. With online shopping impacting the price sensitivity and brand loyalty, entrepreneurs often believe that if their product or service isn’t the cheapest then customers will go elsewhere – and their business will be unsuccessful. This is simply not the case: Did you know that being the cheapest product or service in the market could be devastating your business? Even if you have the best product or service, selecting an unsuitable pricing model can substantially harm your business. To avoid the common pitfalls, we have outlined three steps and strategies to help you when considering pricing models for your business.

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Do the research: Know your customer Part of pricing your product or service is an in-depth understanding of your target audience. Steve Blank has made a significant impact in the role of customer development. Researching his methodologies will significantly help business owners learn about their customers by conducting formal customer development activities. Know your market Once you have a clear understanding of your customer, you can begin to develop an understanding of the market you are planning to enter or capitalize on. This is also the case for existing businesses entering new markets or examining their pricing strategies. There are many market research databases and organizations, including the Black Business Initiative, that can assist you with market research. Know your costs Conducting a thorough analysis of the costs associated with your product or service is a critical step in the pricing process, as some costs are often overlooked. These include: Overhead, value of time, permits, licenses, dues, insurance, legal costs, accounting costs, borrowing costs, taxes, credit card processing fees, IT support, etc. Know when to adjust prices If you have been in business for a while, you may recognize a need or opportunity to raise your prices. While it can seem counterintuitive, remember that your business costs such as rent, materials, travel, etc., will rise with inflation. It is important for your prices to move with your business costs.

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Select a strategy: Competition-based pricing Competition-based pricing, also known as competitive pricing or competitor-based pricing, is based solely on the other competitors in the market. This model does not consider the costs of creating or providing the product or service. It is common for businesses where a slight price difference may be the deciding factor for customers. Whether you have a slightly higher or slightly lower price than your competition, competitive pricing is one way to stay competitive and keep your pricing dynamic. Cost-plus pricing A cost-plus pricing strategy focuses on the cost of producing your product or service. It is sometimes called markup pricing. This is where you “markup” your price based on the desired profit. This pricing strategy is common in retail, specifically where a business sells physical products.

It is not always the best fit for service businesses, as they typically offer far great value than the costs they incur to create the services. In addition, their costs are more closely aligned to operational costs and overhead. Dynamic pricing Dynamic pricing, sometimes called demand pricing, is a pricing model that moves with supply and customer demand. Some of the industries that use this model are hotels and airlines. These industries are often associated with “peak seasons” where costs are higher due to increased demand. Freemium pricing Free + Premium = freemium. This pricing strategy gives a basic level of service for free with extra features or capabilities at an additional cost. When used strategically, the free offering can create popularity and help customers see the value of the offering, eventually captivating and convincing them to pay a fee for extra features. High-low pricing High-Low pricing is based on the novelty of a product or service. In this pricing model, prices are set high as the product launches. Over time, prices drop gradually. The products are often sold at clearance prices as a new version or replacement is introduced to the market. We typically see this model in fashion and technology and it is appealing because it caters to early adopters as well as bargain hunters looking to purchase items at a deep discount. Hourly pricing Hourly pricing or rate-based pricing is often used by consultants, professionals, and other individuals providing services. The individual sets an hourly rate for their time. Some clients opposed to this model as they believe it has the potential to disincentivize efficiency. Penetration pricing Penetration pricing is a strategy where prices are set significantly lower than market value to persuade customers to move away from competition. The prices that are set may create a loss on each sale initially, but the rationale is that the price will rise in the future and customers will stay brand loyal. The strategy is often used by software companies and other industries with competitive, well developed markets. Premium pricing Premium pricing is a pricing model that focuses on the perceived value to customers. This is sometimes referred to as luxury pricing. This model is often applied to brands which are believed to carry an element of prestige and this is reflected in the price. Premium pricing is commonly used in luxury fashion and the automotive industry. Strong marketing is imperative as pricing is a direct function of brand awareness and perception. Project-based pricing Project based pricing, or flat fee pricing, is often used in industries such as construction, consulting, business services, etc. A fee is agreed upon prior to the delivery of the product or service and is often contractbound. Costs may shift slightly throughout the project; however, the intention is that the final cost is in line with the agreement. Final step: Get feedback There are numerous ways to get feedback on your pricing. You can ask potential customers, past clients, look at changes in sales or inquiries, etc. It is wiser to proactively and continuously seek feedback on your pricing than to wait for it to affect your sales. Adjust accordingly Entrepreneurship is about agility and the ability to adapt. Entrepreneurs need to stay up to date on market trends, competitor behavior, and consumer behavior. Being unaware of shifts in the market can have significant impact on the profitability of your businesses. BBI can help! If you would like support pricing your product or service, please contact one of our knowledgeable Entrepreneurial Engagement Managers at bbi@bbi.ns.ca, call 902-426-8683, or visit our website www.bbi.ca The Black Loyalist Heritage Centre tells the story of the largest & most influential communities of free Black people in the world outside of Africa from 1783 to 1791 in Nova Scotia. Museum Hours June to Mid-October Open Daily 10 am to 5 pm October 16 to May 31 Open Monday to Friday 9 am to 4pm Contact Information 119 Old Birchtown Road Shelburne, NS B0T 1W0 Office: (902) 875-1310 Museum: (902) 875-1293 Fax: (902) 875-1352 www.blackloyalist.com

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February 28-March 1, 2020 The Halifax Black Film Festival

The Halifax Black Film Festival (HBFF) is excited to be celebrating its fourth edition during African Heritage Month. Having started off with only one film, the festival is gaining traction and is dedicated to growing and becoming a true diversity movement. A film festival with a bold ambition to change social perspectives, HBFF is devoted to giving unique voices in cinema the opportunity to present audiences with new ways of looking at the world. It’s important to talk about diversity and inclusion and the power of film can never be discounted as an impactful medium for change. Films are powerful and they evoke an immediate emotional response. The Halifax Black Film Festival celebrates diversity within Black communities through films that matter. Films illuminate, entertain and invite audiences to see the world from another person’s experience. When we share Black films with viewers of all colour and ethnic origins, we are better able to recognize the differences that make us unique and celebrate the shared values that bring us together. The HBFF will be bringing another amazing line up of films on the reality of Black people in Nova Scotia and around the globe. Coming together through art allows members of all cultural communities to better understand one another. Sadly, the state of diversity on and off-screen in Nova Scotia is dismal. The HBFF is on a mission to change that and not only are they presenting all Nova Scotians an opportunity to view the world through a different lens, they are also tackling racism head on using an excellent medium. The HBFF is independent and locally operated. It was created by the Fabienne Colas Foundation (FCF) which also founded the Montreal International Black Film Festival in 2005 – Canada’s largest Black film festival – as well as the Toronto Black Film Festival in 2013 – Canada’s biggest celebration of Black History Month. After years of spreading diversity on and off-screen in Montreal and Toronto, the FCF wanted to bring this great festival to Halifax, a city that holds Canada’s oldest Black population. One of their newest programs, Being Black in Halifax, is part of a National Youth and Diversity Initiative called Being Black in Canada, featuring Montreal, Toronto and Halifax. The program in Halifax recently provided four Black filmmakers (age 18–30 years) an opportunity to create a short documentary under the tutelage and mentorship of professional filmmakers. During the process, the film makers had access to producers, directors, post-production crew,

workshops and professional equipment to help them perfect their craft and shoot their films. The films were then presented during Canadian tours at the 15th annual Montreal International Black Film Festival in September 2019. They will also be presented at the eighth annual Toronto Black Film Festival and at the fourth edition of the Halifax Black Festival in February 2020. In addition to tackling diversity through film, the HBFF holds powerful panels and workshops. Through their Black Market initiative, they will present a series of conferences at the Halifax Central Library addressing not only the film industry but also other issues important to Black communities such as building wealth. Business is Jammin’ (BIJ) has partnered with HBFF to bring experienced and esteemed business leaders to the table with the aim of facilitating the acquisition of knowledge and tools to bring about greater success. Be a part of the diversity movement. Find more details at halifaxblackfilm.com, HalifaxBlackFilm on Instagram and Halifax Black Film Festival – HBFF on Facebook. If you are an aspiring Black filmmaker, check outhalifaxblackfilm.com. You could be the next Spike Lee or Ava DuVernay!