Pricing Strategy – Dutch Uncles

When Should Small Businesses Consider Opting For Bundle Pricing?

Aakash Sharma — Mon, 30 Aug 2021 08:35:10 +0000

Bundle pricing, also known as product-bundle pricing, is a strategy retailers use to sell large quantities of high-quality products by offering discounts to consumers. Through bundle pricing, retailers offer many different products as part of a single package and then offer them at a lower price than the cost of buying those products individually.

This pricing method is standard among online retailers. Competitive flat rates under bundle pricing are a great way to promote more products, get noticed, and engage with the audience in an enticing way.

How does bundle pricing work?

Bundle pricing is the practice of selling a group of products as a package. The aim is to make shopping easier for the consumer and put together the related products at discounted prices.

This can be beneficial to the business as more products are sold. Small businesses are encouraged to use bundle pricing as it is a good business model for starting fresh. Bundled pricing is a great way to increase product shipments, stock-keeping units (SKUs) with low success rates and give more value to consumers.

Compatible for Small, Medium and Micro enterprises

Bundling is typical in the e-commerce and retail sectors. For this reason, newer and smaller e-commerce sites often offer product packages with cheap or discounted items.

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Bundle pricing works because 'price' is the most critical aspect for a customer while engaging in any transaction.

In a transaction where customers get bundled pricing, they feel comfortable getting a lot for less rather than paying more for individual entities. This sensation works everywhere – in the FMCG sector, clothes, crafts, telecom services, food and restaurants, and so many more.

Which Indian industries use bundle pricing?

Indian consumer goods companies are the most significant users of bundle pricing. They offer bundled prices for various products for daily use. They do this at several levels, including the B2C, B2B and D2C levels.

The value pool created by this pricing ensures that consumers and retailers get their money’s worth. Small businesses like department stores, clothing stores, thrift stores, etc., often use bundled prices to move their products and gain traction.

Pros and cons – what to do and what not to?

Bundled pricing has both advantages and disadvantages. On the one hand, this is an excellent strategy to use if the company wants to launch products faster or offer customers a higher discount. This pricing method drastically reduces marketing and selling costs. With personalized pricing and product simplification, all types of businesses can use it to accelerate transactions.

However, if poorly used, bundle pricing can do more harm than good to a brand. In some cases, bundled pricing can harm popular products when put against discounted and packaged products. There is always the risk that consumers will reject the product packaging because it does not meet their wishes. Ultimately, entrepreneurs need to develop a solid strategy to create value without compromising the company’s image.

Therefore, SMEs operating in all sectors should take a hybrid approach, applying flat rates to specific products based on customer demand and differentiating other products based on this. This allows them to experiment with the most suitable sales techniques and build a good customer base.

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How the Best Pricing and Costing Practices Can Help You Achieve Great Unit Economics

Chayanika Sen — Fri, 11 Jun 2021 10:35:09 +0000

Unit economics is a term that is loosely used a lot, but often startup owners do not pay much attention to it. This could be a real mistake. But what is unit economics, anyway?

In simple terms, unit economics means measuring the profitability of selling goods, products, or services. For example, suppose you are a widget-making company. In that case, your unit economics will be the relationship between the revenue you receive from selling the widget versus expenses you bear for producing, marketing, and selling the widget. If you’re a service offering company like Uber, your unit economics will be the relationship between the revenue you earn from your services (for example, one ride of one passenger) versus the cost associated with marketing and offering the service to the customer.

Unit economics considers the direct revenues and costs connected with the essential elements of a company’s business model. In other words, it can be said that with this data, one can predict how profitable or not profitable a company can be and when it can reach the profitability state. And if you care about profitability, you can’t ignore to know about unit economics.

To understand unit economics, your first task will be to understand your basic unit. It is the most fundamental thing that reflects how you operate. Once you know the basic unit, you need to do the calculation in the next step. This will tell you how much revenue you will earn and what cost you need to pay to achieve that revenue.

In this context, it is essential to know about LTV or lifetime value which denotes how much revenue you can expect to earn from a single customer account during the entire lifetime of that account with you. To calculate LTV, you need to know the gross margin, how much each customer spends every month, and your monthly churn percentage. Mathematically, it can be represented as:

Lifetime Value = Gross Margin % X (1 / Monthly Churn) X Avg. Monthly Subscription Revenue per Customer

Coming to the cost side, the most frequently used term that you should know about is customer acquisition cost or CAC. It is determined by subtracting all the costs from the total sales and marketing costs to acquire a single customer. Representing mathematically,

Cost to Acquire a Customer = Sales and Marketing Costs / New Customers Won

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If you’re spending more to acquire a customer than its lifetime value, you won't survive in the business for long.

Why Is It Essential to Understand Unit Economics?

“If you can’t measure it, you can’t improve it.” – Peter Drucker.

Understanding and determining your unit economics is extremely crucial for early-stage startups to establish a healthy growth curve. Often, startup owners are so engrossed with their product ideas that they fail to recognize the importance of product-market fit, pricing strategy, cost structure, etc. which is why many startups fail to survive their initial days. But, knowing your unit economics from an early stage can help you make long-term financial projections. And the more accurate your financial predictions are, the more accurately you can predict your revenue trajectory.

How to Calculate Unit Economics?

Before we start calculating, we need to understand what a unit is. A unit can be anything depending on your business model. But as long as you are not mixing your units, your calculation will be impactful.

Customer as a unit

If you have a subscription-based model, every subscription you sell or get a new subscriber, a subscriber (customer) can be one unit.

Units as products sold

This model is more standard for manufacturing business where there is some cost attached to manufacturing a product. However, if you are a SaaS business, then customers as a unit would be more of interest to you than units as products sold.

The easiest way to calculate unit economics is to find the revenue per customer and then divide it by the costs associated with the customer. However, remember since no two businesses are the same, how you derive those values and what you determine as a unit will largely depend upon your business model. For example, for a SaaS business model, unit economics is usually LTV divided by CAC. However, for a more accurate future prediction, you need to consider other metrics, too, as simply LTV metric might not be sufficient. If you’re a new business, a startup, or have a new product launch, using a flexible LTV calculation makes more sense. Whatever you choose, you need to divide the result by CAC to get the unit economics.

Predictive LTV

This formula helps to avoid a sudden and unexpected drop-off in sales by considering how customer preferences change over time.

Flexible LTV

The predictive LTV works better for established companies. But if you’re starting, a flexible LTV would be more helpful to you.

Why Do You Need to Track It?

Unit economics is an efficient tool to determine if the cost of acquiring a customer exceeds or not the lifetime value of a customer. If you’re spending more to acquire a customer than its lifetime value, you won’t survive in the business for long. However, there are some other benefits too of tracking your unit economics.

A tool to measure early success

This is an important metric that often gets ignored by startups. It helps you determine how much you can spend on acquisition and how much you can expect in return. In short, it is an important metric to help you gauge the financial stability and financial health of your business in the long run.

Tool to tweak your model

Unit metrics are helpful as a yardstick to measure and determine if you need to tweak your pricing model, marketing budget, sales approach, or any other parameters that can help you earn more revenues.

Efficient financial planning

By combining your unit economics with your acquisition rate, you will be in a better position to do effective financial planning for your business. So, unit economics is a measure of growth for your business.

Evaluate the changes

Unit economics enables you to evaluate the changes you make to your pricing structure, marketing budget, or any other parameter. Simply determining if sales would increase or not is not as effective as understanding the LTV to CAC ratio. If there is an unfavourable change in the ratio, you need to reconsider your tactics. Thus, it can be safe to say that unit economics helps you to make an informed business decision.

Unit Economics as a Lever of Growth

Unit economics can be considered as a lever of growth or a tool to foresee if any hindrances are coming. It is that yardstick that you can use to your benefit to determine the health of your business. Keeping track of the LTV to CAC ratio is thus very important. Because if you are spending more, your business can get into serious trouble if not intervened early.

It is also easy to predict the growth of your business using unit economics. If your LTV is higher than the CAC, you are making profit from the existing customer base. If you’re able to maintain your LTV and CAC ratio, while expanding your customer base, your business is on a growth trajectory.

While unit economics helps you perfect your business growth, it also enables you to foresee any possible failure. While there can be occasional incidents where you can bear additional expenses, you can’t afford to make it a regular affair of throwing away money just for the sake of acquiring customers. At the same time, you don’t have much business traction, if you’re not acquiring customers and if your CAC value is increasing at a fast rate reaching closer to your LTV rate. Well, a failure is almost inevitable.

When you start a business or launch a new product, you need to hit a certain amount of profit when you can break even. Determining your LTV and CAC early can give you an idea of when you would be able to hit the break even. And not just that, if your units are correct, and if you track it diligently, you will also be able to predict accurately if you are in the right direction or your business decisions need some tweaks.

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An estimated unit economics measure can help you gauge how fast and how much you can spend on the marketing budget before you run out of all the funds.

Best Practices to Keep Your Unit Accurate

Unit economics is a powerful metric to help your business grow, but it won’t be of much use if you are using all the wrong metrics or if your metrics are calculated incorrectly. If you want to predict your profitability accurately, you need to be accurate with your metrics and, if required, recalculate it often.

Here are some examples to give you a better idea

Change of price

It is easy to keep track of your LTV; however, if you have done any updates in your unit economics and forget to update your unit economic calculation, then your LTV to CAC ratio will change because your LTV will be impacted. This can mislead you as your calculations will be incorrect. So, whenever you are making changes to your pricing structure, remember to feed it back to your unit economics calculation.

Capital expenditure

When you are just starting, you need to do more expenses to see growth in your business. However, an estimated unit economics measure can help you gauge how fast and how much you can spend on the marketing budget before you run out of all the funds.

Recalculate whenever costs change

Just like pricing change can affect your LTV change, similarly, when your cost changes, your CAC gets impacted too. This means if you are not feeding back the updates in your unit economics calculations, your CAC value will be impacted. To avoid any faulty calculations, make it a habit to immediately calculate any change in the cost to your unit economics. This way, there will never be a miss, and you will always be using the most up-to-date data.

Improving your unit economics

There are two ways to improve your unit economics. The first option is to cut down your sales and marketing budget. However, this can impact the growth of your business. But at times when your CAC and LTV ratio is too out of balance, cutting down the expenditure budget is a more appropriate measure.

However, it is always desirable to improve your unit economics by increasing the LTV value. You can achieve this by optimizing your pricing and reducing churn, and ensuring the customer stays for a longer time.

The Key Takeaways

Being aware of direct revenues, best pricing and costing prices, and knowing your unit economics is a must for any early-stage startup. By knowing your unit economics depending upon your business model, early-stage startups can better understand and plan their growth trajectory. Giving importance to unit economics can help identify opportunities, take care of a healthy cash flow, and overcome some of the challenges of scaling up your business.

Expert Connect

Chinmay Ananda
Business Storyteller, Financial Educator Finance Academy
Connect with our expert to assess your unit economics and plan your growth trajectory

The post How the Best Pricing and Costing Practices Can Help You Achieve Great Unit Economics appeared first on Dutch Uncles.

Is Kissan’s Pricing Strategy Apt for your Small Business?

Shalmoli Sarkar — Wed, 12 May 2021 11:05:04 +0000

It was during the era of the 90s when the presence of ready-to-eat packaged foods began mushrooming on Indian kitchen shelves. Indian mothers who invariably believed that freshly prepared hot food is best for the kids began looking for other possibilities in breakfast and school tiffin options. Soon, the acceptance of jams and ketchup became a convenient option for the mothers to make the school tiffin and breakfast a bit more interesting with bread -jam, roti-jam, sandwiches, roti-rolls than that of mundane ‘Roti-Sabzi’. Nestle was the pioneer in India to introduce its Maggi brand of ready-to-eat noodles and sauces and became a dominant player in this segment. Meanwhile, Kissan a subsidiary of HUL (Hindustan Unilever Ltd.) too entered the ready-to-eat food segment with its range of jams, sauces, and squashes catering to the kids. When Kissan made its entry into the processed food market, Indian consumers had limited purchasing power. To penetrate deeper into the Indian households Kissan adopted a low-cost price strategy also known as penetration pricing strategy to make its products affordable and attractive to the consumers by giving them value for money.

Despite facing stiff competition from Nestle’s sauces it ensured that its product’s attractive and convenient packaging in a pouch, bottle, and squeezo remains consistent with its core philosophy of providing jams and sauce at an affordable price to appeal to the common masses. This helped the HUL’s food brand Kissan to gather its hold firmly in the Indian households. Today, Kissan is a dominant player in the jams and sauce market with over 19 different types of sauces, ketchup, and jam in India.

This puts forward a question of whether the adoption of a penetration pricing strategy is apt for new small businesses and startups.

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Penetration pricing strategy is a pricing strategy where businesses introduce a low price for their new product or service.

What is Penetration pricing strategy and how does it work?

Penetration pricing strategy is a pricing strategy where businesses introduce a low price for their new product or service. It is generally used when demand for a new product or service is projected to be high. The initial low price of the offering tends to disrupt the market by making it difficult for the competitors to match up to the low price and respond to the change quickly, this gives the ventures the benefit of first movers advantage in pricing.

New businesses and startups, to earn and expand the user base, can remove the price barrier by letting the masses try a new product or service at an affordable price. With a low pricing customers may view the purchase as less risky and be more likely to try it. Penetration pricing strategy can increase the volume of sales that will offset the risks of a low price, thus helping to reach break-even.

New ventures to stand out from the competition will emphasise bringing points of differentiation in the business. India is a developing economy where households will always search for options that can cut their expenses hence, the convenient way to break into the market is making the buying decision easier through low pricing. Many companies have adopted the penetration pricing strategy to disrupt industries and become market leaders.

An instance of penetration pricing strategy is Reliance’s Jio network that offered free internet to its users straight for three months. The low initial price point helped Jio to gather users, where users at almost zero costs got a taste of its lightning 4G data speed whereas initially , Airtel was the first telecom service provider in India to launch its 4G data plans.

Keeping things in mind to adopt Penetration Pricing Model

Below are the pointers for a business while going green with the penetration pricing strategy:

Determine the business goals: Businesses need to fix what they want to achieve, whether they want to increase market share, profitability, increase cash flow, beat the competition, reach new prospects, etc. Here, with penetration pricing businesses cannot be desperate to reach the break-even point quickly.
Analyse the target audience: This step will help businesses to understand why and how customers will use your product or service based on their specific and urgent needs. By analysing the target audience, businesses should have answers to questions like what problem they are facing with the current price point of the competitor’s product and how does my low-priced product help ease the pain.
Study the competitors: Identify three direct competitors and study their structure of pricing. For example – With heavy pricing what freebies or extra services do they offer? At times customers might find it difficult to switch to the brand despite offering low prices since the competitor with high prices is additionally offering some extra benefits. Consider the substitutes a customer may use to solve the task or problem that your product or service addresses.

What should businesses be wary of regarding penetration pricing strategy?

For the cost-conscious consumers, penetration pricing strategy has risks of customers switching to other brands for prices if slightly increased. Here, businesses need to announce and implement price hikes to avoid this outcome. Sometimes a lower pricing strategy might be perceived as an inferior product by the audience therefore, the brand image needs to be protected from prejudices and presumptions.

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How does the Government Regulate Drug Pricing?

Smruthi Krishnan — Sun, 02 May 2021 07:30:04 +0000

Regulation of drug prices is a very important aspect when it comes to the pharmaceutical industry. These companies can function relatively unregulated and can raise drug prices beyond inflation rates allowing them to increase revenue despite sluggish demand. This is where the government intervenes with regulation policies which mainly revolve around price controls. Pharmaceutical companies oppose drug pricing reform arguing that lowering the cost of prescription medications will hinder innovation. However, such high surges in drug prices can affect the economic status and health conditions of citizens.

Drug Pricing in the absence of regulations depends on the following factors

Uniqueness

If the market is saturated with the same drugs to treat a certain illness then the price of new drugs innovated for the same illness will be lower. Uniqueness is important when it comes to setting the price.

Competition

The popularity and success of the drug’s competition determine the price of the drug. If the drug provides additional benefits then it will have a higher price.

Research and Development

The amount of time, effort, and money that a pharmaceutical company invests in the R&D for each drug must be weighed when the drug is priced.

Effectiveness

The new drug should be able to change the current way of treatment of the illness like preventing the need for certain medical treatments or surgeries, etc. They should be more effective in treating the illness and saving other costs for consumers.

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The price ceiling policy in India placed more than two decades ago has led to India having one of the lowest drug prices in the world.

How Governments Regulate Drug Pricing

If drug prices are too high, consumers may not go for it. Health insurance payers may not allow reimbursement and physicians won’t prescribe it. To ensure affordability and a proper healthcare system, the governments initiate price control policies that make drugs cheaper and easily accessible to everyone which is necessary for a country where most of the citizens cannot afford medications.

The price ceiling policy in India placed more than two decades ago has led to India having one of the lowest drug prices in the world. However, the information asymmetry between the buyer and the seller has led to black markets and the selling of spiked drugs. Prices of essential drugs are regulated by the Indian central government under the Essential Commodities Act, 1955.

In 1997, the National Pharmaceutical Pricing Authority was set up to revise prices of drugs, enforce the Drug Price Control Order (DPCO) and monitor the prices of drugs. Today, the DPCO lists 851 drug formulations whose prices can be capped based on certain dosages.

The ceiling price is set as the average price for all brands selling a particular drug with more than 1 percent of the market share. If the price of a drug is below the ceiling price, it can be raised only after a year. Patented drugs or fixed-dose combination drugs are exempted from this policy.

Impact of Drug Pricing

The drug price control policy has led to many pharmaceutical companies going out of production causing substandard and spurious drug manufacturers to thrive in the industry. With poor regulations, there is a trade-off between price and quality leading to several black markets for drugs, selling of fake drugs or dangerous drugs to patients in need. Sale of cap priced drugs reduced while those without any cap increased. Medications for diseases like HIV or cancer are not on the list and hence their drug prices remain sky-high.

However, price controls help poor consumers to opt for a recognisable brand instead of settling for fake medicines. It increases affordability and accessibility for patients across the country. However stricter guidelines and more transparent information about drugs and drug companies are required to ensure an efficient system.

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Vaccine Prices in India See a Cut and a Deduction

Anju Nambiar — Sat, 01 May 2021 11:35:04 +0000

India has two major vaccine producers, Bharat Biotech and Serum Institute. Both of these vaccine makers have been changing their pricing due to two factors; lack of profits and public outcry. But now, finally the prices of both these vaccines have been slashed by INR 100 (Covishield) and INR 200 (Covaxin) per dose for supply to state governments.

Reason behind vaccine price cuts and reductions

Vaccine producers are working towards supplying to state governments at lower costs in order to help them support the public healthcare system and to ease their burden.

This is because the price being offered to the state governments is still double the amount at which the central government is procuring the vaccines.

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The price reduction for Covishield stands at 25% which has not yet garnered the acceptance of people.

Pricing Policy on Shaky Grounds

The two prominent vaccine manufacturers had earlier raised prices because they were struggling to make ends meet and struggling to meet demands. The pricing policy of these manufacturers is on shaky grounds due to the discrepancy and they are not sure whether they need to defend their pricing, stick with it, or change it. It’s a very vulnerable time for them.

Price cuts are not justified

The price slashing being announced with much pomp and show on the media is not justified since the price of Covishield in India is markedly higher than in other countries like South Africa and Sri Lanka where it is priced at INR 300 per dose. In the European Union, Covishield is priced at INR 160 per dose and in the UN initiative, it is INR 225 per dose.

So the price cuts don’t make sense. But in India, production is hampered due to lack of initiatives by the Government. There are calls for vaccine price moderations under an act by the Government. The public is at unrest regarding the Central Government’s decision to allow manufacturers to fix the price of vaccines, a move which is unjustified to the common man.

Covid vaccines come under ‘essential commodities’ under the Essential Commodities Act 1955 and the Disaster Management Act 2005. There are calls for these acts to be invoked.

What’s in it for me?

Vaccine producers are being extremely transparent and are pumping in a lot of internal funding to support manufacture. Since public health is at a critical stage, there is no question of making profits. The main motive of Covid vaccine manufacturers is to save lives.

India’s top vaccine maker the Serum Institute of India (SII) is producing vaccines at a rate incomparable with any other organisation. If you are a drug or vaccine maker thinking of stepping into the game, you need to ramp up your supplies to fulfil shortages and demands, especially in India.

Pharma or Healthcare start-ups planning to assist in India’s covid fight need to be consistent and transparent with their pricing policy. Whether you are supplying drugs, vaccines, or other medical support, it will be a public interest project. Healthcare start-ups fighting the pandemic need to take a not-for-profit approach. There is also a lot of ground for innovation, especially around intranasal vaccines, etc.

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How can MSMEs in Edtech Secure Limited Budget Schools as Customers?

Aakash Sharma — Tue, 06 Apr 2021 06:35:04 +0000

Adopting digital and technological changes has become a crucial process in everyday life. And over the past few years, edtech has become a rapidly growing technology sector. Today, every educational institution needs to use digital technology to some extent, whether in traditional schools, academic start-ups or even for individual teachers. In fact, teachers and edtech entrepreneurs already use at least some online learning methods, participation, assessment and grading in their bids to adopt this technological change ushered in by edtech.

Traditional Education is Incorporating Edtech

Traditional educational institutions are gradually evolving to offer e-learning opportunities. However, the COVID-19 pandemic accelerated this process by forcing the education industry to provide learning services such as digital communication applications and essential online tools for conducting e-classes and assessment modes. With this tectonic shift, educational institutions are also seeking technical advancement by undertaking digital textbooks and various other research resources for students.

Many educational entities are expected to turn to edtech shortly, but most of them face budget issues and challenges. This has become the biggest hurdle for education technology companies to develop their customer base and acquire new customers. To address these challenges, edtech companies can use various methods like cheaper pricing standards, offering free sample products/services to end-users and combining other revenue-generating opportunities with them.

So, let’s delve deep tint the nitty-gritty of this segment and the sustainable way to generate money for small businesses.

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A business owner needs to find a suitable business model that takes advantage of the unique benefits and offers a lasting competitive edge to it.

Edtech is Endlessly Adaptable for the Education Industry

Setting up a pricing strategy is the biggest challenge of the new edtech start-ups or companies soloing to switch to the sector. Without a large membership flow, businesses cannot use their pricing strategy to test complex price groups for different categories or surveys.

One way to visualize the value of educational institutions responsible for edtech is to ask some fundamental questions-

Does the price allow you to turn a profit, given your business model?

Do people think the price is suitable for the product you offer?

Are consumers willing to pay for products received?

The exact price of any service or product depends on the business model. A company’s primary goal is not to generate sales revenue but to generate profits. When an entrepreneur visually evaluates her/his products solely from the competitors’ POV, s/he subconsciously ignores the fundamental differences between capital, cost, strategy and business that are unique for indicial enterprises.

Price Parameters and Market Strategy

Edtech and education businesses have a wide array of options to choose from while selling their services. They can use a premium model, charge a fee for their courses, or use the subscription model that can be prepaid monthly or annually to cover the services’ cost. In effect, a business owner needs to find a suitable business model that takes advantage of the unique benefits and offers a lasting competitive edge to it.

These are some of the ways to ensure a sustainable remuneration for business services-

Maintain the expectation of prices

Most of the edtech start-ups and beginner tutorials fall into the significant category of online classes and education resources, with slight differences or site-specific nuances of each business. However, each product category needs to meet the customer expectations individually, especially price expectations. This means a high-value client regarding a niche subject that will be of great personal advantage to them may still be unwilling to spend more than Rs 599 for a Smartphone app, Rs 999 for a video course, or Rs 2499 for an online instructor.

Traditional top-down sales

The top-down sales model is a sales strategy where sales are introduced at the highest prices and then negotiated down slowly for prices that match their potential. This model works best when the widely used edtech product is a course or technology platform solution. This strategy is the backbone of the K-12 industry. However, a business needs resources and time to sell at a high level in the traditional school system. The education system is bureaucratic and slow, which leads to utterly slow growth. Most start-ups don’t see rapid growth or profitability from these products and choose to drop out. The key here is to remain constant for sustainability.

Justifying the Price

Ultimately, each company needs to quote a justifiable price that the consumer can pay for the output. This is notably valid for SaaS (software as a service) based edtech start-ups selling periodic subscriptions. Avoiding overpromising and under-delivering is the key to sustainability.

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Proven Pricing Strategies for the Beauty, Health and Wellness Sector

Roopali Kotwal — Sat, 03 Apr 2021 12:35:03 +0000

Pricing strategy plays a very crucial role in a marketing strategy of a product. Now, the option to choose a pricing strategy can be very challenging but you would need to start by choosing one to understand how your product should enter the market and how you have a high consumption rate.

7 Pricing Strategies for Beauty, Health and Wellness Sector

One size does not fit all so does the pricing. Pricing strategy is different depending on the mode of buying and location with slight variation in prices of their product/service. Due to covid-19, e-commerce is a higher bet now and has a slightly different pricing strategy than retail store pricing. Big beauty brands like L’Oréal, M.A.C, Lakmé and nutrition and fitness brands have an online presence and are running the business through e-commerce retailers or directly through their apps with a combination of pricing strategies. Let us find out these proven and trending ways of pricing in today’s age and time:

Subscription Box/Services – Box of healthy food/supplements or skincare essential products or beauty/cosmetics customised as per consumer needs is delivered at the customer’s doorstep. The subscription is available on a monthly, quarterly and annual membership basis the type of box one subscribes for. Similarly, the subscription services/deals for health and wellness programs go on. Usually, the annual pack/membership will turn out to be the most cost-effective

Competitive– Smart pricing where other payers’ prices are used as the benchmark until a business has an exclusive range

Bundle– A package of related products is sold at a lower price than each of the products separately

Try and Buy – Consumer selects a product and chooses to pay later. Upon product delivery and post-trial, the customer can either keep or return the product ordered online

Psychological – Two items/products with almost similar price i.e. one at INR 499 and another at INR 401 plus INR 99 shipping charges. Online retail sellers use this price strategy to encash even though the overall pricing is the same for both the products

Special Event– E-commerce player link discount to a holiday, festival, season and advertises like Sale of the day etc.

Promotional– Buy1Get1/Buy2get2/Buy3Get3 pricing clubbed with other special discounts forms promotional pricing

Prevailing credit card offers also attract consumers to buy and get additional discounts like loyalty/reward points along with refer & earn promotional programs for boosting sales.

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A balanced and sustainable approach to the pricing of a product or service is essential in any scenario either changing market trends or consumer behaviour. Adaptability is critical for Sustainability!

What’s in it for me?

A balanced and sustainable approach for pricing is essential. Low priced products/services may underrate the brand value and keeping the premium pricing may become the reason to lose competitiveness. Hence, strategic pricing will be required.

During lockdown due to coronavirus, many retail businesses/entrepreneurs adapted online retail mode (e-commerce) to bring the product to the consumer as they saw the changing consumer behaviour for purchases through e-commerce sites. It drove the retailers all the more to change their selling pattern and thus the cause had an effect on the pricing strategy as well. Businesses swiftly transformed their approach to mitigate the losses and to sustain. Nykaa is a perfect example of this scenario! After all, Adaptability is critical for Sustainability!

To be a successful Entrepreneur, be cautious of varying trends arising due to any situation, know your competition and watch their offerings but don’t follow them blindly, understand consumer behaviour, make dynamic and adjustable pricing, assess market position correctly, be up to date with the fresh data/numbers and use mind-hacks to win over. Blending strategies from time to time i.e. a combination approach is always better than a single strategy. Additionally, the use of tools/technology for better pricing insights and crafting one for your business shall enhance the sales. And last but not the least, keep loyal customers delighted and customise offers for them as retaining the existing customer base may be more effective than looking out for new ones.

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New Pricing Strategies for Enterprise Tech

Aakash Sharma — Thu, 01 Apr 2021 06:35:04 +0000

Companies can use different pricing strategies when selling products or services. To determine its most effective pricing strategy, a company’s senior management must first determine its pricing position, price range, pricing power, and competitive pricing strategy.

The price trend in Enterprise Tech, or Enterprise technology, is rapidly changing and improving. Enterprise Tech refers to the concept of shared data and information technology (IT) resources within an organisation. IT strategy, project portfolio management and IT governance make the idea and implementation of enterprise tech effective.

An important example of enterprise technology is a content management system. WordPress is now the largest CMS technology company in the world.

Enterprise tech pricing is based on three critical elements of a profitable pricing strategy:

The pricing model should balance price and revenue.

The pricing strategy should meet development goals.

Psychological pricing strategies need to adjust prices.

Finding the proper stability between value and income complements the ability to help customers and be fairly compensated for that help in the enterprise tech industry.

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The price trend in Enterprise Tech, or Enterprise technology, is rapidly changing and improving. Pricing strategies are directly tied to the user's enterprise technology solution cost.

These are some new trends in enterprise tech pricing strategy

Cost Per User Method

In the enterprise tech industry, pricing per user is a small pricing model in which a business charges each user for their products. For example, some companies charge Rs 999 per user per month, while others charge a flat fee for unlimited monthly usage.

In this model, a single user pays a fixed monthly price. If another user is added, the value will be doubled, and so on. This increases the monthly revenues of a company. Besides, it is straightforward for customers to understand the importance of their membership, and start-ups can easily estimate their income using this mode.

Usage-based Billing

Also referred to as the ‘pay-as-you-go model’, this pricing strategy is directly tied to the user’s enterprise technology solution cost. The more you use the help, the steeper the price and vice versa.

This pricing strategy is more prevalent among technology platforms and infrastructure-related software vendors (like Amazon Web Services). Customers are priced based on the number of API applications, purchases processed, or gigabytes of data utilised in this type.

Layered Pricing Strategy

Layered pricing is one of the most common pricing strategies used by enterprise tech companies. This pricing allows companies to offer multiple “packages”, while offering different combinations of prices. The number of the packages provided can vary greatly, but the average ranges around three in low, medium and high pricing tallies.

For example, HubSpot, the content marketing company, uses multiple sequence values in its pricing strategy. Each of its kits is designed according to potential customers’ different needs (and budgets), from new entrepreneurs to professional entrepreneurs and marketing companies.

Flat Rate Pricing

Flat rate pricing may be the easiest way to sell SaaS solutions in the enterprise tech industry. In this model, the company offers a single product, including features under standard pricing slabs.

Examples of fixed prices are mainly in publishing and e-commerce. For example, if you sign up for The New York Times, you have to pay a fixed monthly or annual fee.

The post New Pricing Strategies for Enterprise Tech appeared first on Dutch Uncles.

New Pricing Strategies for FinTech

Anju Nambiar — Mon, 29 Mar 2021 12:35:05 +0000

This is the right time for FinTech start-ups to take off due to the ever-decreasing costs in this sector. However, the market currently has many players. Acquiring customers initially requires you to give them a taste of your best products and services free of charge while keeping the avenue open for a premium version upgrade.

However, when customers are left with a multitude of choices and when they can get exactly what you are offering elsewhere, it’s pointless to wait around for them to upgrade or hope that they would make a purchase with you. Instead, you can target your products and services towards a niche market with more precise customer needs.

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FinTech start-ups formulating a pricing strategy need to first understand how a particular strategy will be accepted in a specific market.

Subscription-based pricing strategy

The subscription-based pricing strategy is a new trend in Fintech where you can offer your products and services for subscribing customers at a recurring monthly fee. Despite the risk involved in subscription price modelling, FinTech start-ups need to explore this increasingly popular strategy.

The subscription pricing strategy is beneficial for FinTech start-ups because customers may choose for a lower recurring subscription fee over an exorbitant one-time lump sum amount.

A good example for this is ‘Splitsub’, a Gurugram-based FinTech start-up offering subscription splitting services for OTT platforms.

The OTT market is huge and Splitsub partners with the biggest names in digital entertainment by offering to handle the payments of their partner’s customer base.

The ‘free’ pricing plan

The ‘free’ pricing strategy is a new trend in Fintech which a multitude of successful Indian Fintech start-ups have scaled up on. Offering consumers, a ‘free’ pricing plan alongside paid memberships is a sure shot way to make them flock to you.

For example., Paytm., India’s biggest FinTech company enables bank-to-bank transfers at 0% fees.

Talking about new Indian FinTech start-ups that are doing exceedingly well through a ‘free’ pricing plan; ‘Refren’, a Bengaluru-based FinTech company offers free invoicing services alongside a premium payments and expense management system. It has managed to receive angel funding in 2020 backed by high-profile investors including Paytm, and Shaadi.com founders and ‘The Collective’ VC Fund, among others.

What’s in it for me?

FinTech start-ups formulating a pricing strategy need to first understand how a particular strategy will be accepted in a specific market.

Offering a premium membership or pricing plan for FinTech customers is a brilliant strategy for FinTech start-ups although it may not seem so on the surface. This is because setting premium pricing reflects the value you can bring to customers who expect personalized services. On the other hand, a premium pricing model also encourages less affluent customers to sign up for your service as a free customer, thus helping you expand your customer base.

The free model may seem counterintuitive for FinTech start-ups who are trying to make profits right off the bat. On the other hand, asking for a high subscription fee may also not bring in the right numbers. But due to the low cost of setting up your FinTech start-up, it may just work in your favour.

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