The Beginner’s Guide to Pricing, Part 3 of 4: 3 Pricing Model Trends That You Need to Know Right Now!

The Beginner’s Guide to Pricing

Part 3 of 4: 3 Pricing Model Trends That You Need to Know Right Now!

Traditionally, businesses make money by charging a specific price for a product or service; however, as competition increases and product and service offerings become more complex, modern businesses have taken more creative approaches to maximizing profits. In this blog, I will discuss the top 3 pricing model trends that you need to know.

1. Make Money on Advertisements

Facebook and Google are giant corporations, but they don’t make money off their users, they make money on advertisements. Since their products/services attract a large client base, marketers recognize the potential to advertise on these platforms.

Challenges: This model is not for everyone, as you will need a large client base (at least in the millions) to succeed. If you are a blogger for instance, attracting a large user base may take years of consistent content development.

2. The “Freemium” Model

Many software companies, like LinkedIn and Dropbox, offer a free base product. Their pricing model is to charge for premium and advance features. The trick with this model is that it allows the users to try out the product and perceive enough value to upgrade after.

Challenge: Be careful when determining the base product features. You should give enough features to entice the clients to upgrade, but not too much that they are comfortable with what they have. Critics of the freemium model argue that it supports freeloader who will never become paying customers. If you are a startup, how much are your limited resources are going to be used to produce this free resource and what are the costs of converting a free customer to a paying customer.

3. Discounted Products Through Subscription

In order to hook clients, some companies offer full-priced products next to the same product discounted through a subscription. One classic example of this is cell phone companies, where the cost of a cell phone is cheaper when you sign unto a phone plan.

Challenges: In my last post about pricing, I mentioned how we respond positively when we think that we are getting a deal; subscription-based pricing is meant to illicit that response. If you decide to go with this strategy, make sure that you are making enough margin on the subscription to cover the discount given on the full priced item.

 

Wendy Ha, CPA, CMA

www.wendyha.com

With over seven years of experience working in small-to-medium sized businesses, Wendy is very knowledgeable in all aspects of accounting and tax. Her vision is to bring a fresh and innovative approach to accounting for small businesses and startups, thus helping them succeed in the ever changing business environment.

0 Comments

Leave a reply

Your email address will not be published. Required fields are marked *

*

The CAPTCHA cannot be displayed. This may be a configuration or server problem. You may not be able to continue. Please visit our status page for more information or to contact us.

CONTACT US

We're not around right now. But you can send us an email and we'll get back to you, asap.

Sending

©2018 Minority Women in Business Inc.

Log in with your credentials

or    

Forgot your details?

Create Account