Price your product or service incorrectly and you’ll soon find yourself in a right pickle.
Too high and potential customers will scamper for the door. Too low and you’re locked in to a loss maker.
Traditional cost-plus pricing and value-based pricing can seem like a heady mix of math and magic. But now there’s a third option: crowdsourcing.
Deep breaths, anxious entrepreneurs…
…While the idea of leaving the pricing of your blood, sweat and tears to a bunch of anonymous strangers may cause collective buttock clenching across Australia’s business community, brand-spanking new business PricingProphets has applied its founders’ 20+ years of pricing expertise to the age-old chestnut:
‘What price should I charge?’
In the process, they’ve roped in loads of other experts (15 and counting) with experience across a range of industries (36 to date) to make sure the price is always just right.
PricingProphets co-founders Jon Manning and Greg Eyres launched the new service in late-May 2011. Manning, a behavioural economist and all-round pricing enthusiast, had been watching the Melbourne crowdsourcing scene for some time. But it wasn’t until a fellow attendee at a crowdsourcing talk asked ‘What price should I…’ that he thought to combine the two.
“Later that evening it hit me: here was the eternal pricing problem… and it could be solved via crowdsourcing.”
Pricing challenges for SMEs
PricingProphets is predominantly geared towards small-to-medium sized enterprises.
In Manning’s words: “There are literally millions of SMEs all around the world who don’t have the budgets to employ dedicated pricing analysts, or to conduct in-depth quantitative or qualitative market research.”
“They haven’t got time to read a book on pricing, and they are unlikely to have their pricing challenge solved at a pricing conference. The service makes pricing research timely, accessible, affordable and, particularly for SMEs, egalitarian.”
“And to compliment that, we have experts from all around the world as well.”
Since launching, PricingProphets has worked with start-ups and established companies alike – it seems no one’s immune to pricing challenges.
“Some companies just resort to charging the same price as their competition, or let the customer determine or influence the price,” according to Manning.
“Furthermore, its estimated that 70-80% of companies simply apply cost-plus pricing: working out the cost to manufacture a good or a service, adding on a mark-up and hoping for the best.”
“Costs are relevant for the measurement of profitability, but not as a basis for prices.”
PricingProphets on why consumers buy
“Consumers buy on the basis of the benefits or value they receive, rather than what it costs a company to manufacture or produce a service,” Manning says.
“Our service addresses this by telling customers what price they should charge and why… In answering the second question, experts typically provide value-based rationale for the price-point they have recommended.”
How it works
PricingProphets works as follows:
- Upload details of your pricing challenge
- Seasoned pricing professionals provide detailed feedback
- Execute your new expert-approved pricing strategy