Price Determination for Maximum Profits

Brenda Stone - June 24, 2006 - Texas-Signing-Agent.com

Pricing determination and fee setting strategy is not just grabbing a fee to undercut your competition. Pricing is not just about money, it is about achieving a purpose.

 
There are four pieces to successful marketing and succeeding in business:

1-Product (Loan signings)
2-Place (Delivering the Product / Area Covered)
3-Promotion (Marketing)
4-Price (Fees)

The critical questions are:
1- How can I improve my loan signings to appeal to hiring entities?
2- Where will I cost effectively deliver my signing services.
3- How can I effectively market my services?
4- What should I charge?

 
When you know the answers to #1 - #3 then you will focus on #4. Here are pricing strategies which will achieve certain goals for your business:


# 1 - Price low to to penetrate the market. Use this technique when introducing a new product to gain as many customers as possible. You need a back end product to take up the slack for you. For instance, you can do local tax loan or seller packages for $50.00 to get your name out there and get experience, but do not under price your backend product of loan signings. Do well on the cheaper model and then you can command your price on the higher end product.

Another good example would be my book which I introduced at $9.95. Or, another example, my "free" newsletters. I want to attract attention to my product (my writing) and this is the way to use low pricing. Use when there is a big "backend" product (such as my next edition of the book or the next book I author.) which will be considerably higher than $9.95. I have proven my writing ability through free and cheap products and gained market confidence.

New signers, remember you must not price low on all products/services, however, it's okay for your business to do so on a low-end product as long as you have a higher end product to pick up the money slack.

#2 - Price high to skim maximum profits. Use when you still have an edge on your area's notary population. Skim maximum profits and put some aside before the influx of new notaries into your area. This may not work for many but if you can swing it now, this will assist you to hold onto your business when you have to fade the heat of low volume in your area and when you must work on your marketing strategies to over come competition sophomoric pricing strategy to crush you.

#3 - Price extremely low to crush competition. This is a technique I cannot recommend because it is wrong, according to David Frey who says, by the way, "technically this practice is illegal." Drilling out competition in an area by any means is illegal. The concept is disgusting to me.

#4 - Pricing to make a "normal" profit. Your objective here is to set a price that is seen by your customer as honest and reasonable. Utilize with a customer that you have a long-term relationship with and whose trust you value immensely. In this case you might use a cost-plus pricing strategy. (Make a serious un-ignored mental note to find out what your cost is per signing and engage a cost-plus price. )

We all need to do a little normalizing of our profit.  When I set a "normal" profit price, I know that I am not just making a quick fee but stabilizing a business which will be here. I know what it costs me to run my business and I know that by engaging slim or no profit margin at all I would get myself into a situation where my business would run my personal finances into the dirt.

As mentioned before, I now work three days a week, however, I am left with four days of the week to do as I please. During these days I market, engage Expert-ism techniques, brand myself,  and do jobs on which I price normally and with an eye to "keeping my business running." I do not think in the short term and grabbing the $50 bill to hit Wal-mart to buy up a bunch of clutter for my life.

Frankly, I can say that my confidence in knowing I have a small pay check coming in for 20 hours per week is priceless. I confidently turn down jobs which will not help me yield my goal of $300 per week at my signing business. My signings and my job are not my only income. I have more than one revenue hub channel and will continue to develop more.  However, taking a job to do while the signing business is slow was critical for me not to break the bank and savings account. 

#5 Pricing to be competitive.   Use when you have few options  on pricing determinants. When pricing competitively, remember to be sure and include a decent profit, else it does not matter if you get work, or not, you will dig yourself a hole and fall into it.   The BEST offense if you are in a saturated market is to normalize your fee structure (do a cost plus profit analysis) and be a shameless marketing fool.

#6 Pricing for maximum profit and maximum sales.  Once we have a decent business and a few steady contacts which depend upon us, it is at this juncture of our business's life we know enough to be sure of the maximum fee we can charge while keeping the maximum amount of clients and jobs coming in.

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This article was written using the concepts of another article by marketing guru, David Frey. (You can read the entire article here.  It is entitled "How to Price Your Services for Maximum Profit." )