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Be Remarkable Via Your Pricing Strategy

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Being the first, the best, or the only one doing something (and in a way meaningful and relevant to your customers) is a strategy your company can use to stand out from your competition.

Something that is relevant to all your customers is how they compensate you for your products or services. Adding a spin to the way they pay may be a way to help your business be remarkable.

Most of us heard about the restaurant* that offered "'pay-as-you-wish" pricing? There are no prices, and the waiter doesn't bring you a bill.  At the end of the meal, you simply leave what you feel the meal was worth. "Pay as you wish"' as an idea wasn't new, but it was in a restaurant atmosphere.

Many "new" ideas are simply existing ideas combined in non-traditional ways. Old ideas remixed to form new ones.

*The pay-as-you-wish restaurant concept may not be that successful, seems I should have learned and remembered the name of the restaurant that started it. Yet, being remarkable doesn't mean you have to be world famous. You only need to be memorable enough to be the stand-out choice from among your potential customers' choices.

Methods of Payment to Explore


Below is a list of common (and not-so-common) payment methods. Apply these to your business, and create a new approach that allows you stand apart from your competition.

Some of these may have more technical names than what I've dubbed them. Please correct me in the comments section below.


  • Per Hour/Day (Increments)
    Your company pays you every two weeks. Military personnel receive monthly payments. The plumber charges by the hour.


  • Deposits
    The management company charges you a month's rent upfront when you sign your apartment lease. They use this money to pay for any damage you might have caused to the apartment during your stay. It also prevents tenants from skipping town and breaking


  • Fixed Amount (Excess Pays More)

    I have an allowance of 300 instant messages per month on my phone. After 300, I pay on a per-IM basis.

    When you lease a car, the contract limits the total number of miles you can put on the car. The dealer wants to make sure the car can be leased again after you return it. If you exceed the allocated mileage, you pay a premium for that extra use.


  • Soft Pricing (Negotiable)
    Though one could argue that all  pricing is negotiable, I'm talking about the type pricing you especially find in international markets and swap meets.

    If you pay the posted price for that leather jacket in Florence or for that Mickey Mouse gum ball machine at the old Drive-In Swap Meet, you're a sucker. The process includes their making you a stupidly high offer, and you countering with an equally low offer, and the final price somewhere in between.


  • Barter/Trade
    Instead of money in exchange for services or goods, you pay with services or goods. The local printer will print your flyers for free if you help her with her marketing plan.


  • Bandwagon/Economy of Scale
    The more you buy, the lower the price. You can order 1,000 business cards at a cheaper per unit price than for 500. There is a new product/invention site where the price of newly invented products reduces as the total quantity is ordered.


  • Custom vs. Off the Shelf
    It comes in white, black, or silver. That's it. You can pay more to have a red one if you want. Heck, you can have it any color you want if you're willing to pay for it.

    With D.I.Y. (do it yourself) being back in style, you can have someone hand-craft a messenger bag to hold your laptop. Compared to a mass-produced store bought item, the bag could:


    • be cheaper because it is made by a local crafts person who charges for materials and a bit of labor. (They make these because they enjoy it; they made them with love).


    • cost you an arm and a leg because it is one of a kind and hand-crafted from special leather by artisans from exotic locations.




  • Generic vs. Branded Pricing
    An item is priced more cheaply because it is a generic brand, not a name brand. Store or generic brands are less generic as they used to be. (I think stores have learned they can drive incremental sales and charge more than generic and still less than name brands by offering "store brands.")

    Back to the car example: Top tier luxury cars are expensive and generally constructed with the same priced, quality materials, yet prices can differ by tens of thousands of dollars because you pay for the logo, the brand.


  • Privilege Fee (Because We Can/Opportunistic)
    I'm not a fan of this one, but it is common. For example, I have a cat, and not only is the management company for my apartment  charging an initial pet deposit, but also monthly pet rent. The company charges us $25 more a month to keep a cat in the apartment. Why? Because they can.


  • Points/Credit Systems (Custom Currency)
    I love companies who give employees benefits as a flexible point package. An employee has 50 benefit credits to spend. They can distribute them among medical, dental, vision, sick days, or vacation days as they choose to support their needs.

    You don't wear glasses? Why pay vision coverage you won't use? Use those points toward more dental coverage for your braces. Reward the healthy by allowing them to put unused sick days toward vacation days.


  • Layaway
    The store holds the product for you and removes it from the sales floor so no one else can buy it. You pay the store in installments, and when you've paid the total balance, you can take possession of the item.


  • One Time Set-Up Fees
    My printer will make a custom die-cut for my funky shaped brochure. That first order will be expensive. Thereafter, any time I need more brochures printed, they will be less expensive.

  • In Bulk/Per Unit (Parts)
    In Bulk: Warehouse membership stores (Sam's Club, Cosco, etc.) is where you can save a bundle on per-unit pricing. That assumes you need a two-gallon of mayonnaise or a year's worth of razor blades. It's cheaper to buy bulk foods (out of those plastic bins) than to pay for the pre-packaged, advertising items.
    Per Unit: While traveling, I forgot my iPhone charging cord at home. When I went to the local Apple retailer, they had a jar of cords and of ear phones at the counter. How smart is that? I didn't need to buy a whole kit ...  just the separate part. (They offered them in bulk, come to think of it).


  • One Part Free/One Part Fee
    Give the razor blade holder away for free, charge for blades. Give me the Kindle e-book reader for free, charge me for the books. Charge me less for my latte when I bring my own re-usable cup. It is good for the environment and reduces the cafe's cost of goods.


  • Cut / Percentage/Commission / Tips / Incentive
    Your sales person makes commission based on how many qualified leads they bring in. Restaurant staff in North America is awarded tips for itsr service. The electronics store is offering a pizza party to the store that sells the most TVs this month.


  • Free Trial/Free Trial With Limits or Catch
    Free trial is a great way to reduce risk for the customer. Test driving a car or trying on those earrings are methods that allow us to try before we buy. A secret of those selling jewelry is that they know if you "try it on" (sample/trial) you start to imagine that object in your life. Trying it on increases the chance of purchase. Once they get you behind the wheel of that car, you see it as yours.

    I'm not a fan of the 30-day free trial that automatically activates if you don't cancel. It is presented as a no-risk, "we are doing this so you have the convenience of keeping it if you like it." More often than not, the vendor counts on you to forget to cancel and become a customer by default.


  • Automatic Renewal
    You opt into automatically opt having a product/service renewed at the end of the payment cycle. The magazine will automatically charge your credit card, and you won't "miss an issue."

    Though pitched as a convenience for the customer, I'm convinced this is more about reducing the risk of customers dropping out if faced with the decision of re-entering their credit card to make yet another purchase.


  • Scarcity, Access Based/Seasonality
    Scalpers make a killing selling last-minute tickets to desperate concert-goer-wannabes.

    We used to pay more for fruit and vegetables that were out of season. To get fresh strawberries in the winter used to be a miracle.

    However, now that we've made the world smaller with fast transportation modes, you can have nearly any food at nearly any time of the year. And hotels also have seasons;  it is cheaper to stay in the hotels during off-season/non-tourist season.


  • Or Best Offer (OBO)
    A classic pricing method for yard and tag sales. That TV is going for 50-bucks ... or best offer. OBO can turn into an auction situation.


  • Per Project/Value-Based/Scope-Based
    As a consultant, I haven't charged a per-hour rate. I charge per project. I work with the client's specific needs to determine the right price for the scope of the specific project.

    I would charge more to help them develop plans for a $20 million than a $20 thousand project. Clients pay based on the value of the project.


  • Subscription (Magazines)
    A yearly fee gives you access to a fixed number of installments. Magazines. Netflix. Jelly-Of-The-Month Club.

    I pay an annual fee to Amazon to be a "Prime" member, which allows me free shipping. This makes buying from Amazon less costly than chain bookstores.


  • Per Person (Admission)
    We buy tickets to the movies, sports events and conferences this way.


  • Auction (Highest Bidder)
    Traditional auctions and eBay demonstrate this model. Low demand, your price is low. High demand, and those who really want it, have to pay for that right.


  • Per Idea (Quantity)
    Brainstorming remarkable ideas can be like looking for a pearl in oysters. The more oysters you shuck, the more you increase your chances of finding a pearl. Why not charge clients for the total number of quality ideas generated? More ideas equal more pearls.


  • Pay When Service Is Not Needed (Insurance)
    We pay a monthly premium to protect ourselves from car damage, from something being stolen, from getting sick. While it seems costly, it pays for itself when used.


  • Based on Return (ROI)
    Charge your clients based on the results they gain from your products and services. If the ad agency's radio ads helped me generate x amount of business, they get x% in payment. This is an incentive for them to push for your success.


  • All You Can Eat (All You Can Consume)
    $19.95 all you can eat buffet. My mobile phone provides me with unlimited data as part of my plan.


  • By Weight
    We buy produce, meat, and fish this way at the grocery store.


  • The Price Is Right
    When someone is willing to sell something if the right price is named. Your neighbor (who doesn't really want to move) puts their $1 million house on the market for $1.2 million. If someone is willing to pay that, they'll sell!


Different Combinations / New Ideas




  • Could a bookstore charge by weight? Or offer a book of the month club. One price, and  for twelve months I take any book I want.


  • What if the plumber charged by the job instead of by the hour? By value? Stopping a pipe from flooding your house is worth more than unclogging a drain.


  • A PR firm who charges when there wasn't a crisis? You pay them only if things were going well. This is incentive for them to do things regularly to keep your business in good shape.


  • What if Weight Watchers charges me only when I'm losing weight. If I'm gaining, something's not working.


  • What about combining subscription with all you can eat? (We do this for a gym membership; one price gets you free access). As a member, I pay a once-a-year membership to a restaurant chain. In return, I receive a card that allows me unlimited, free items.


    • At Applebee's Neighborhood Grill And Bar, the program would allow unlimited meals. (Drinks cost extra.)


    • At Starbucks Coffee, I get unlimited drinks, of any size, anytime I want.  (Food items costs extra.)


    • Maybe the movie theater can charge a one time fee for access to a year's worth of movies. Who goes alone? Who doesn't buy popcorn and treats at the refreshment stand?




  • Back to the buffet. What about charging by weight? Weigh me when I enter the restaurant, and charge me by how heavy I am when I leave? (I'm sure if someone tried this, during end-of-the-day clean up, staff would find rocks and weights hidden in the restaurant from people sandbagging their initial weight.)


Closing Challenge


Is there a way for your company, with a change in pricing strategy, to be the first, the best, or the only? What other clever payment schemes have you encountered?


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Hi there!

I'm Paul Williams... guest writer on Daily Fix and founder of Idea Sandbox.

I'm a professional problem solver. Through brainstorm facilitation I help people create remarkable ideas to grow their business. As one client put it, “Idea Sandbox turns brains into idea machines.”

Prior to launching Idea Sandbox in 2005, I spent 15 years building marketing, branding, and customer-experience strategy for The Disney Company, the Aramark Corporation, and Starbucks Coffee Company.

I founded Idea Sandbox driven by my passion to help others create remarkable ideas. I blend the skills and lessons I have learned to build a sandbox---an idea sandbox.

You can reach me on Twitter via @IdeaSandbox.

Through Idea Sandbox, I have helped solve challenges, grow brands, think-up remarkable ideas, and create innovation for companies including: Starbucks Coffee Company, Starbucks Coffee International, Panera Bread Company, Seattle’s Best Coffee, Woodhouse Day Spas, The Microsoft Corporation, and Wells Fargo Mortgage.

I am a writer, speaker, columnist, and brainstormer living just outside Washington DC, in Alexandria, Virginia.

If you like what you've read here, you can find more of my thoughts at my Idea Sandbox blog.

I always welcome comments and reactions to what I've written. I'm on Twitter: @IdeaSandbox

Nice to meet you,


Paul

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Comments

  • by John Chawner Mon Apr 19, 2010 via blog

    The restaurant you can't recall may be Potager in Arlington, Texas. I have not yet dined there, but I'm told the food is very good.

  • by Steve French Mon Apr 19, 2010 via blog

    This is interesting, thank you.

    ~Steve

  • by Paul Williams Tue Apr 20, 2010 via blog

    John - cool, I'll look them up. Thanks (a) for reading DailyFix, (b) for taking the time to comment, (c) for the tip! - Paul

  • by Reuben Swartz Mon May 3, 2010 via blog

    Great post! Lots of good pricing ideas. Remember to use value as the anchor for your pricing-- otherwise you can go around in circles.

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