Every time a customer pays with a card, a slice of that sale goes to someone else. And if you’re running a lean operation, those slices add up fast. That’s why choosing the right payment system for small business isn’t just a tech decision—it’s a money decision.

This guide will help you understand how payment systems work, what fees to expect, and how to find the lowest total cost option to bring money into your business without bleeding profit.

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How Payment Systems Work (Without the Tech Jargon)

Here’s what really happens when a customer pays you with a credit card:

1. The payment processor (Stripe, Square, Zoho Payments) handles the transaction.
   
2. The payment gateway approves or declines the charge.
   
3. The acquiring bank pulls funds from your customer’s account.
   
4. The card network (Visa, Mastercard) routes the request.
   
5. Your business bank receives what’s left.
   

And each of those players? They get a cut.

So when you charge $100, you might only receive $97—and that’s before any monthly software fees.

Where Your Money Goes (and How Much You Lose)

Let’s say you bring in $10,000/month from customer payments.

• If your processor charges 2.9% + $0.30, like Stripe or PayPal, you’re paying about $290+ per month in fees.
  
• Over a year, that’s more than $3,500. Gone. Vanished.
  

That’s why picking the right payment system for small business is so important. It’s one of the easiest ways to increase your profit without selling a thing.

Compare the Best Payment Systems for Small Business

Here’s a simple breakdown of which system works best depending on how you get paid.

Why Zoho Payments Is Worth a Look

If you’re already using Zoho Books, CRM, or Subscriptions, Zoho Payments gives you a clean, integrated experience with fewer moving parts. It’s one of the only systems that charges a flat 2.0% fee without tacking on per-transaction costs. That might not sound like much, but here’s what it means:

• $10,000/month in payments with Stripe = ~$290 in fees
  
• Same volume with Zoho = $200
  

That’s nearly $1,100 a year in savings—enough to cover software, marketing, or a well-earned vacation.

Why So Many Businesses Add a 3% Surcharge

You’ve probably seen signs like “3% fee for credit card use.” It’s called a surcharge, and it’s a legal way to pass processor fees onto your customers—as long as you disclose it properly.

But here’s the problem:

• Customers hate it
  
• It can damage your brand image
  
• Some processors or card networks frown on it
  

A better move? Offer a cash discount instead. Frame it as a reward, not a penalty.

How to Choose the Right Payment Setup

Ask yourself:

• Where do most of your transactions happen? Online, in-person, or through invoices?
  
• What payment methods do your customers prefer—credit, debit, ACH?
  
• Are you already using tools like Zoho or Stripe that can help simplify?
  
• How much are you currently paying in fees?
  
• Can you streamline with a single system instead of using three?
  

What to Do Next

1. Audit your current payment system and fees.
   
2. Compare it to other tools in the table above.
   
3. Consider testing Zoho Payments, especially if you’re already using Zoho CRM or Books.
   
4. Offer a small discount for cash or ACH payments.
   
5. Choose a payment system for small business that fits your workflow—and keeps more money in your pocket.
   

Final Word

The payment system you choose will either eat your margins or protect them. Most small business owners just go with what’s easy or familiar. But by taking a closer look at your options—and understanding how payment processing actually works—you can stop overpaying and start keeping more of every dollar you earn.

Choosing the right payment system for small business isn’t about chasing the trend. It’s about protecting your profit. And now you know exactly where to start.

Frequently Asked Questions

Can I accept credit card payments without paying fees?

Not entirely. Every payment processor charges fees. But you can choose one with lower rates, like Zoho Payments or a flat ACH option through Melio, to keep more of what you earn.

What’s the cheapest way to accept payments from customers?

For in-person transactions, cash is the cheapest (no fees). For digital payments, ACH transfers are typically the lowest cost. If you need to accept cards, look for a payment system with flat, low fees—Zoho Payments is one of the most affordable.

Do I need special software or hardware to accept payments?

It depends on how you operate. For online businesses, you’ll need a platform with built-in payment capabilities. For in-person, Square and similar systems offer card readers. If you’re invoicing, Zoho Books or Stripe can handle payments without extra hardware.

What’s the difference between Stripe, PayPal, and Zoho Payments?

Stripe is great for developers and custom integrations. PayPal is easy to set up but has higher fees. Zoho Payments is ideal for small business owners already using Zoho tools—it’s integrated and offers lower flat rates.

Should I charge customers more to cover credit card fees?

Some businesses do, but it’s risky. Customers may get turned off by surprise charges. A better option is to offer a cash discount—framing it as a savings, not a penalty.

This is where AppSumo comes in really handy. It’s a free software marketplace where you can get great lifetime deals on alternatives to the biggest (and most expensive) digital marketing platforms.

After testing, tweaking, and (yes) rage-quitting a few platforms, I’ve found the three that actually deliver. These platforms won’t just help you create a course—they’ll make the entire process smooth, scalable, and even fun. Let’s dive in!

Top Picks

• Best Overall: Learniverse – $59
• Best Value: Forento – $49
• Best for AI Integration: Open eLMS – $59

Why You Should Use an Online Course Builder

If you already have a website — and it’s a WordPress site, you might be wondering why I’m recommending that you use an online course builder. I’m gonna tell you.

Any time you want to add a feature or a function to your WordPress site, you’re going to add a plugin. Plugins are messy, plugins break, and plugins will eventually leave a bunch of what I call “digital dust bunnies” on your site that will slow it down and just be so much harder to manager.

Hence – I’ve decided a few years ago to focus my site on content and keep it fast and easy to navigate and put all my other functions – like courses on third-party platforms.

If that sounds good to you — read on.

What I looked at:

When selecting an online course builder, I consider several factors that can significantly impact the online course creation process. These include ease of use, features offered, pricing, and customer support. A platform that combines these elements can make a substantial difference in how quickly and effectively I can launch my courses.

Learniverse

Creating a course shouldn’t feel like assembling IKEA furniture without the instructions. But what if you could generate learning paths in minutes instead of hours? Learniverse turns websites, PDFs, and even a few words into ready-to-learn training materials—fast, efficient, and frustration-free. With Learniverse, smarter training starts now. It’s perfect for course creators, educators, and small businesses looking to streamline their training processes.

What People Say

Users appreciate how Learniverse simplifies the course creation process, allowing them to focus more on content rather than logistics. The AI capabilities are a game changer for many.

• I was amazed at how quickly I could create a course. The AI features really helped me turn my ideas into structured content without the usual headaches.- coursecreator99

Pros and Cons

Pros:

• User-friendly interface
• Quick course creation
• AI-powered features

Cons:

• Limited modules in lower tiers

Why You’ll Love It

• Create interactive learning paths and track learner progress effortlessly
• Customize and share AI-powered training in minutes with an intuitive platform

Long-Term Cost Benefits

Investing in Learniverse can save you time and effort in the long run, especially if you plan to create multiple courses. The efficiency gained can translate into more courses and potentially more revenue.

Current Price: $59

Rating: 4.5 (Total: 100+)

Forento

Forento makes launching your online courses feel like a breeze. It’s designed for creators who want to build their own branded platform without the tech headaches. Whether you’re selling courses, e-books, or memberships, Forento has got you covered. I love how it allows you to customize your site with your branding, making it feel truly yours. Plus, it’s user-friendly enough that you can get started right away, even if you’re not a tech whiz.

What People Say

Users rave about how Forento simplifies the course creation process, allowing them to focus on content rather than getting bogged down by technical details. The ability to customize branding is a big hit too.

• Forento is really easy to use. My wife and I created two courses this weekend. We are very happy with all current features and with some upcoming new ones. Definitely one of the best purchases I made in the last years.- yoquil

Pros and Cons

Pros:

• User-friendly interface
• Fast setup for courses
• Great customer support

Cons:

• Limited payment options initially
• Currency change requires integration with payment gateways

Why You’ll Love Forento

• Create and sell unlimited online courses and digital products
• Customize your platform with your own branding and domain

Long-Term Cost Benefits

Investing in Forento can save you a lot of time and effort in the long run. If you plan to create multiple courses, the ease of use and customization can lead to increased sales and a more professional presence online.

Current Price: $49

Rating: 4.83 (Total: 84+)

Open eLMS

Open eLMS is a game-changer for anyone looking to create engaging eLearning courses quickly. With its AI-driven capabilities, I can turn a simple line of text into a fully-designed course in just minutes. It’s perfect for educators, small businesses, and anyone wanting to share knowledge without the usual hassle of course creation. The platform is intuitive, making it easy to customize everything from images to voiceovers, which is a huge plus for me.

What People Say

Users appreciate how Open eLMS simplifies the course creation process, allowing them to focus on content rather than getting bogged down by technical details. The ability to customize every aspect of the course is a big hit too.

• When I first purchased this, I created a course which was easy, but then after I explored all the options to create pictures and all the editing, I absolutely LOVE THIS! It is totally AWESOME and easy to use, edit, and customize.- TigerCat716

Pros and Cons

Pros:

• Fast and easy course creation
• Extensive customization options
• Great support and ongoing updates

Cons:

• Some features are still in development
• AI-generated content may need manual tweaking

Why Open eLMS Stands Out

• Create stunning eLearning courses in minutes
• AI-driven customization for a personalized touch

Long-Term Cost Benefits

Investing in Open eLMS can save you a lot of time and effort in the long run. If you’re planning to create multiple courses, the ease of use and customization can lead to increased sales and a more professional presence online.

Current Price: $59

Rating: 3.88 (Total: 16+)

FAQ

What should I consider when choosing an online course builder?

When selecting an online course builder, I recommend considering your specific needs and goals. Think about the type of content you want to create, the level of customization you require, and your budget. For instance, if you want to create interactive courses with multimedia elements, platforms like Open eLMS or Learniverse might be ideal due to their AI capabilities. Additionally, check for features like analytics, payment integrations, and user support, as these can significantly impact your course’s success.

How easy is it to use these platforms for someone with no technical background?

I understand that many people feel intimidated by technology, but I can assure you that platforms like Forento and Learniverse are designed with user-friendliness in mind. They offer intuitive interfaces that allow you to create courses with minimal technical skills. For example, I found that Learniverse enables me to turn simple text or PDFs into structured courses quickly. Most platforms also provide tutorials and customer support to help you navigate any challenges you might face.

Can I monetize my courses effectively using these platforms?

Absolutely! Monetization is a key feature of all three platforms. Forento, for instance, allows me to sell courses, e-books, and even offer memberships, all while maintaining my brand identity. I can set my pricing, create discount codes, and choose payment gateways like PayPal or Stripe. It’s essential to market your courses effectively, so I recommend leveraging social media and email marketing to reach your audience. Each platform also provides analytics to help you track sales and adjust your strategies accordingly.

Wrapping Up

Right now, if you have a “very specific set of skills” (like Liam Neeson), you can’t afford not to leverage them to make some money. And, the good news is that (despite what some folks say) you don’t have to spend a fortune on online course builders like Kajabi or Thinkific — there are TONS of affordable platforms out there that are just as easy to use.

It’s not about the software — it’s about your content and how you get your content out there – and as far as I’m concerned – these are a great place to start.

	Learniverse	Forento	Open eLMS
Rating	N/A	4.83/5 (84 reviews)	3.88/5 (16 reviews)
Highlights	GDPR-compliant, AI-powered course creation, customizable learning paths.	White label, customizable platform, supports multiple digital products.	AI-driven course creation, video presenters, voiceover generation.
Pros	Fast course creation, intuitive interface, good for small businesses.	Highly customizable, great for community engagement, responsive support.	Quick course setup, extensive customization options, good for various content types.
Cons	Limited features in lower tiers.	Limited payment integrations, currency change requires payment gateway setup.	Some features still in development, may require learning curve.
Price	$59	$49	$59
	Buy Now	Buy Now	Buy Now

But Wait — There’s More

All of the above online course builders are on AppSumo. But I want to add ONE more featured app that I am using now and this is for anyone who is using Zoho One to run their business — it’s called TrainerCentral.

TrainerCentral: The Best Online Course Builder

TrainerCentral by Zoho is the budget-friendly online course platform that does the hard work for you. With its AI-powered course builder, you can create a structured course with just one click—no tech headaches, no endless formatting. Whether you're hosting live sessions or offering self-paced learning, TrainerCentral gives you everything you need to teach, engage, and sell without the high costs of Kajabi or Thinkific.

Designed for coaches, educators, and entrepreneurs, TrainerCentral comes packed with features like built-in payments, student communities, and seamless Zoho integration. Get pro-level tools at a fraction of the price and start selling your courses the smart, stress-free way.

Buy Now

We earn a commission if you make a purchase, at no additional cost to you.

I’ve been using TrainerCentral for a few years now and I really like it — it’s so easy that I can create a course in less than 30 minutes and have it ready to sell.

It’s got a free option where you can have up to 3 courses. This will more than pay for itself.

Listen, I get it. You’re sitting there watching everyone else blast their lists with DEALS! OFFERS! BUY NOW! while you’re wondering if there’s a way to make some extra holiday cash without feeling like you need a shower afterward.

Plus, between wrapping presents, planning family gatherings, and trying to remember where you stashed those holiday decorations, who has time for complicated marketing campaigns?

Take a deep breath. I’m about to share some surprisingly simple holiday sales tips without losing your soul (or your sanity). These aren’t your typical marketing tips – they’re perfect for those of us who break out in hives at the thought of being pushy.

Turn Your Holiday Anxiety into Your Secret Weapon

Here’s something funny – that reluctance you feel about being too “salesy”? It’s actually your superpower. Why? Because your customers are feeling exactly the same way about being sold to. They’re tired of the endless parade of holiday promotions too.

So let’s use that awareness to create something different. These holiday sales tips are designed to come from a place of service rather than sales. After all, you’ve already got clients and customers who know how great you are, your company is and your products are. So make it available to them — and you don’t have to be pushy or promotional.

1. The “Help, Don’t Hustle” Holiday Quiz

This is one of my favorite holiday sales tips for lead generation.

Remember those magazine quizzes we used to love? Create one for your business:

• “Which [your product] matches your gift recipient’s personality?”
• “What kind of holiday shopper are you?”
• “Find your perfect last-minute gift match”

Implementation tip: Use a free tool like Interact to create your quiz in under 30 minutes. Share it on social media with the message “Stumped on gift ideas? This might help!”

Not a holiday theme – but you can see MY quiz right here.

2. The “Oops, You’re Not Behind” Email Campaign

Send an email with this subject line: “Still haven’t finished your holiday shopping? Good!”

Then share how your product or service can actually be the perfect last-minute gift because it doesn’t require shipping. Think digital gift cards, downloadable products, or service certificates.

Implementation tip: Write your email like you’re reassuring a friend who’s panicking about being behind on holiday prep.

Here’s a prompt you can use in ChatGPT or Claude.ai to write the email:

You are tasked with writing a promotional email for a last-minute gift offer. To create an effective and non-pushy email, you’ll need to gather some information first. Once you have the necessary details, you’ll craft an email that highlights the offer’s benefits and urgency without being overly aggressive.

First, I’ll provide you with the following information:

<offer>

{{OFFER}}

</offer>

<desired_outcome>

{{DESIRED_OUTCOME}}

</desired_outcome>

<urgency_reason>

{{URGENCY_REASON}}

</urgency_reason>

Now, follow these guidelines to create the email:

1. Start with a friendly and engaging opening that acknowledges the last-minute nature of gift shopping without being judgmental.

2. Briefly introduce the offer, focusing on how it can solve the recipient’s gift-giving challenge.

3. Highlight the desired outcome for the customer, emphasizing the benefits they or their gift recipient will experience.

4. Mention the urgency reason, but do so in a way that creates a sense of opportunity rather than pressure.

5. Include a clear call-to-action, but phrase it as an invitation rather than a demand.

6. Close the email with a warm and helpful tone, offering assistance if needed.

Throughout the email:

– Keep the tone conversational and friendly.

– Focus on the benefits and value of the offer rather than pushy sales tactics.

– Use “you” and “your” to make the email feel personal and relevant to the reader.

– Keep paragraphs short and easy to read.

– Use bullet points if listing multiple benefits or features.

Craft the email using only the information provided in the offer, desired outcome, and urgency reason. Do not invent or assume any additional details.

Present your email draft within <email_draft> tags. After the draft, provide a brief explanation of your approach within <approach_explanation> tags.

3. The “Secret Santa” Social Media Strategy

Instead of pushing products, share daily tips or resources your audience might need right now. Then casually mention how your offering fits in:

“Holiday Budget Stretched Thin? Here’s a quick tip: [share money-saving advice] P.S. Speaking of savings, we’ve got gift cards starting at [your lowest price point]”

Implementation tip: Create 5-7 helpful posts right now, schedule them to go out over the next week.

4. The “Non-Sale” Sale

Frame your offer as a helpful solution rather than a discount:

• “Last-minute gift certificates – delivered instantly”
• “Skip the mall – give the gift of [your service] instead”
• “No wrapping required – digital delivery”

Implementation tip: Focus on convenience and problem-solving rather than discounts.

5. The “Holiday Helper” Package

Bundle your products or services into ready-made solutions:

• “The ‘Oh no, I forgot someone’ Gift Bundle”
• “The ‘Save Christmas’ Last-Minute Package”
• “The ‘Emergency Gift’ Solution”

Implementation tip: Create 2-3 bundles at different price points, name them something fun that acknowledges the last-minute nature.

6. The “Real Talk” Review Strategy

Share genuine customer stories about how your product or service saved the day: “Last year, Sarah used our [product/service] as a last-minute gift for her mom. Here’s what happened…”

Implementation tip: Reach out to 3-5 past customers today asking for their holiday gift stories.

Why These Approaches Work

These strategies work because they’re built on empathy, not pressure. You’re not trying to convince anyone to buy – you’re offering genuine help to people who are already looking for solutions.

Your Last-Minute Marketing Timeline

Here’s your super simple action plan:

1. Today: Pick two strategies from above
2. Tomorrow morning: Spend 30 minutes implementing the first one
3. Tomorrow afternoon: Set up the second one
4. Rest of the week: Monitor and respond to engagement

Remember, you don’t need to do everything. Pick what feels most natural to you and your business.

The Bottom Line

The best holiday marketing doesn’t feel like marketing at all. It feels like helping. And isn’t that what the season is really about?

So stop worrying about being pushy. Focus instead on being helpful. Your bank account (and your conscience) will thank you.

Ready for a Holiday Marketing Breakthrough?

Look, I know coming up with holiday sales tips and ideas when you’re already stressed about the holidays feels overwhelming. But what if we spent 90 minutes together turning these ideas into a real plan for your business?

Let’s roll up our sleeves and create your last-minute cash infusion strategy. Schedule a Working Session with me now for only $150. No pushy tactics required – promise!

The Big Picture: How Much Are Small Businesses Spending?

According to our survey, over 75% of small businesses spend between $500 and $3,000 on marketing each month​. 

That’s a broad range, but it reflects the reality of small business budgets: some are just getting started with a few hundred dollars, while others can afford to invest more consistently. This spending generally covers essentials like digital advertising, email marketing, and social media management, though some larger businesses use this budget to pay for consultants or part-time marketing support.

But get this: nearly 9 out of 10 small businesses have reduced their marketing budgets recently, as rising costs in other areas (like gas, groceries, and childcare) force owners to reassess their finances​. 

But does spending less mean these businesses are seeing less success? 

Surprisingly, 92% of respondents feel that their marketing is effective, despite budget cuts. 

This suggests that small business owners are getting savvier about how they allocate every dollar.

Breaking Down the Costs: Where the Marketing Dollars Go

1. Social Media:
Social media marketing emerged as the most popular area of investment. Nearly half of the respondents (47.76%) said social media is their primary source of new customers​. With organic reach becoming more elusive, many small businesses are putting ad dollars into platforms like Facebook, Instagram, and LinkedIn. Facebook is the top-performing platform for 31% of businesses surveyed, with Instagram and LinkedIn tied at 16% each​.

2. Digital Ads and Content Marketing:
Following social media, digital ads, email marketing, and content creation are other key areas where owners spend their marketing budgets. Only 6.63% rely on content marketing alone, highlighting the need to invest across multiple channels rather than putting all your budget into one basket​.

3. Referrals and Word of Mouth:
Interestingly, 22% of business owners still rely on referrals—meaning that old-school word-of-mouth marketing continues to hold its own against digital trends​. For these businesses, spending less on digital ads and focusing on customer experience can pay big dividends. For example, investing in loyalty programs, customer thank-you gifts, or networking events could drive more referrals without adding to ad spend.

How to Decide on Your Marketing Budget: The 5 Key Factors

Knowing how much others are spending is useful, but every business is unique. Here are five critical factors to consider when deciding your own marketing budget:

1. Revenue:
   Our survey found that most small businesses make between $5,000 and $20,000 per month, with those at the higher end able to spend more on marketing. A common rule of thumb is to invest about 5-10% of your monthly revenue on marketing. So, if your business pulls in $10,000 monthly, consider allocating at least $500 to $1,000 for marketing efforts.
2. Target Audience and Channels:
   Which platforms and channels does your ideal customer frequent? If your audience is on Instagram, you might allocate more of your budget there. For businesses that cater to an older demographic, referrals and email marketing could be more effective than spending heavily on TikTok or Snapchat ads.
3. Customer Acquisition Cost (CAC):
   Calculating your CAC helps you understand what each new customer costs to acquire through different marketing channels. Lower-cost channels—like organic social media, referrals, and email—tend to have a higher return on investment but might take longer to scale. Conversely, paid ads on social platforms or Google can bring in leads faster but may be costly.
4. Growth Stage:
   Are you a startup, or are you well-established? Startups might need to allocate more initially to build brand awareness, while established businesses can get by with a lower spend focused on retention and customer loyalty.
5. Competitor Spend:
   Take a peek at what your competitors are doing. Are they heavily active on LinkedIn or running frequent YouTube ads? Knowing their approach can give you a sense of how much you need to spend to remain competitive.

Budget-Friendly Tips from DIYMarketers Respondents

If your marketing budget is tight, don’t worry. Plenty of small business owners have found clever ways to make their marketing dollars stretch. Here’s what some of our survey respondents had to say:

1. Leverage Customer Feedback for Content Ideas:
   Several respondents mentioned the power of using customer feedback and testimonials as content. Repurposing positive reviews into social posts, blog articles, or video testimonials costs little and builds trust with potential customers.
   
   “When I turned positive customer reviews into social media posts, it helped us keep a steady flow of content without increasing our budget.” — Chris T.
   
2. Use Free or Low-Cost Tools to Increase Efficiency:
   Tools like Canva, MailChimp, and Buffer allow small business owners to handle their social media and email marketing without needing a full-time marketing team. Many respondents use automation to save time on repetitive tasks, freeing up time for strategy.
   
   “Canva and Buffer are my go-to tools. They let me create professional-looking designs and stay organized without spending a ton on marketing.” — Kelsey D.
   
3. Focus on Networking and Referrals:
   With 22% of respondents relying on word-of-mouth, networking events, and customer referrals are still some of the most cost-effective strategies. Offering referral discounts or hosting in-person events to build relationships can yield excellent returns for minimal cost.
   
   “Offering discounts for customer referrals has worked wonders. It’s a low-cost way to bring in new business through our existing customers.” — Ashley R.
   
4. Develop a Marketing Plan and Stick to It:
   One of the top goals for many respondents in 2025 is building a comprehensive marketing plan. Having a roadmap for the year helps avoid last-minute spending and ensures a steady stream of promotions across all channels.

“Creating a regular posting schedule on social media and our blog keeps us top-of-mind without the need to increase ad spend. It’s all about consistency.” — Tyler L.

5. DIY Marketing with Occasional Support from Consultants:
   While 25% of respondents handle all marketing themselves, many also hire consultants for specific projects or to create a strategy. This allows them to benefit from expert advice without the high cost of a full-time hire.

Is It Time to Increase or Decrease Your Budget?

With nearly 89% of businesses admitting they’ve had to cut back on marketing expenses, the question of whether to increase or decrease your budget comes down to performance​. 

When our survey asked small business owners how effective their current marketing efforts were, over 90% felt their strategies were working. That’s a high satisfaction rate, but it also raises the question: could more spending boost results even further?

If you’re achieving results within your current budget, maintaining it might make sense. But if you’re struggling to reach your audience or gain traction, it might be time to revisit your spending or reallocate funds to higher-performing channels.

Final Thoughts: What’s the Magic Number?

Ultimately, there’s no “magic number” that suits every small business. But one thing’s clear: a strategic approach to budgeting—based on revenue, target audience, and competitor behavior—will yield better results than simply throwing money at multiple channels. Remember, effective marketing doesn’t always mean a big spend. Even small budgets can create significant impact with the right tactics and a bit of creativity.

The bottom line? If you’re looking to succeed in 2025, consider our respondents’ insights: focus on building connections, automate where you can, and double down on the channels that drive results for your business. With the right mix of strategy, patience, and a little bit of data-driven decision-making, any small business can turn even a modest marketing budget into measurable growth.

It’s something that might seem obvious at first, but many business owners find it difficult to actually get their customers to see and appreciate the value of what they offer. I mean, you created this awesome product or service to solve a real problem, right? So why aren’t people beating down your door, eager to hand over their cash? This is where understanding customer perceived value meaning comes in. Because, you know, people won’t fork over their hard-earned money unless they believe your product or service is worth more than the price you’re asking.

And let me tell ya, sometimes this disconnect comes down to how you’re presenting things, how you’re marketing your brilliance. Maybe you’re not effectively communicating why what you offer is so darn good. Maybe you need to tweak your marketing efforts to highlight all the ways you’re helping people save time, solve problems, and feel like a million bucks.

So, what is perceived value exactly?

Well, in a nutshell, it’s the customer’s evaluation of your product or service. But here’s the catch: It’s not just about its actual worth— it’s about how they perceive it, and what they expect to get from it. Customer perceived value in marketing management is a key concept for any business owner.

Think of it like this: You could be offering a high-quality product that’s actually the best on the market. But if your messaging is confusing, your website is clunky, and no one’s raving about your work, your customers might not get why they should choose you. So their consumer perceived value could be much lower than it deserves to be. This is why understanding customer perceived value in marketing is essential.

Where Does Perceived Value Come From?

Perceived value doesn’t appear magically. It’s the result of a well-crafted marketing journey that begins with really understanding your customers. You’ll learn a whole lot by following those podcast hosts that share how to connect deeply with customers.

Podcasts such as the Hustle Daily Show go into great detail on why it’s important to first do the marketing legwork before launching anything.

This starts by diving into research, understanding your target audience (aka your ideal customers). It involves figuring out their pain points, the issues they’re trying to solve. But it goes deeper, you’ve got to pinpoint their desired outcome—what they really want to achieve. Then, you’ve got to find a way to deliver that outcome smoothly and efficiently. This could include offering same-day delivery, crafting seamless online experiences, and building processes that create consistent, predictable outcomes.

But if people don’t feel like they’re getting what they bargained for, their perceived value goes down the drain. Just ask United Airlines who found themselves facing some serious PR trouble after removing a passenger from an overbooked flight in 2017. This customer perceived value debacle really highlighted the importance of understanding customer expectations and providing an excellent service experience.

A Budget-Friendly Guide to Boosting Customer Perceived Value

So now that you understand a little bit more about this elusive perceived value thing, how do you as a solopreneur actually go about boosting it—especially if you’re working with a limited budget? That’s exactly what we’re diving into, because knowing is half the battle. I’ve put together a bunch of actionable strategies you can put into play. We’ll also look at ways you can discover exactly what perceived value your customers have right now, so you can create targeted marketing campaigns that work like magic.

Understanding Your Customers’ “Job-To-Be-Done”

We all have “jobs-to-be-done,” whether we realize it or not. These “jobs” aren’t necessarily traditional jobs—they represent our needs, desires, and the things we’re trying to accomplish. It’s kinda like taking those elements of value Eric Almquist, John Senior, and Nicolas Bloch shared in their Harvard Business Review research back in 2016. For example, hiring a virtual assistant could be about saving time. It’s a time-saving tool. Another way to think about this time saving tool might include using automation for email follow ups.

Another tool you can incorporate to boost productivity is using video messaging. You could even incorporate that video messaging concept as a sales tactic. By using their best tips, you can elevate customer satisfaction surveys, and see exactly how effective video messaging is. All of this can lead to a higher customer perceived value.

Image credits to Intercom

Digging Deeper: Identifying The JTBD

How can a business owner go about really discovering those “jobs-to-be-done?” Think about that new coffee machine you bought, maybe it wasn’t a need, but rather a desire to up your coffee making game and impress guests (because it looked pretty). As humans, we want nice things, so don’t judge.

Ask yourself this question. How did that new machine change the experience for you?

• Did it save you time in the morning because you no longer had to wait in a drive-thru line?
• Was it more functional because you now could froth your milk to create pretty designs in your lattes?

The truth is that understanding this mindset shift can create explosive customer satisfaction. In order to uncover this for your business, think of a time you were trying to find a solution to a problem you had. What process did you go through?

For example, say you’re an SEO expert. A solopreneur struggling with attracting more leads through their website would definitely benefit from what you have to offer. The JTBD here is attracting those highly qualified leads because they either lack the expertise, have no idea how to track leads to increase profits or just don’t have the time.

Boosting Perceived Value Through Simple Tweaks

Solopreneurs have an opportunity to showcase their brilliance and increase perceived value without breaking the bank. That is because smaller companies are uniquely positioned to more easily make necessary adjustments, because let’s be real, you’ve got more freedom to adjust without going through multiple bureaucratic departments, such as sales, customer service, and product design teams. But it involves getting super specific about all the great things your product or service provides. You can increase the perceived value through excellent customer service. Here’s a little insider info—start with that research we just discussed and uncover what your customer is actually buying (functional or emotional).

Creating “Aha” Moments

These are moments where customers see the benefits and impact of using your product firsthand. A great example is in the 66th episode of Perceived Value podcast by Sarah Rachel Brown. This podcast about value talks about how a guest experienced one of these moments. They realized something new and interesting after attending an event with another artist and learning something that caused an internal shift.

Now this could happen because a solopreneur suddenly discovers your business helped them save time—time they could be spending on pursuing a passion, traveling, spending quality time with family, or just having some good ol’ relaxation. This is how to increase perceived value of your product.

“Hanging Dollar Bills on Pain Points”

A lot of the time we focus on what we’re giving the customer when we sell, instead of helping them understand what their costs will be if they DON’T get what you’re selling. That could mean identifying the costs of their pain points (what your business is fixing), both tangible and intangible. So put a dollar value on each pain point. Understanding how to calculate customer perceived value is a valuable tool for any business.

As an example, say a customer’s website isn’t showing up on Google and they’re missing out on getting ten leads each month as a result. What are they actually losing if they continue this way? Maybe each lead, on average, brings in a sale of $500. If they’re not showing up in Google search, they’re potentially losing $5000 per month, and maybe even losing out on valuable customers they could market to over the long term through an email marketing strategy.

A great example of using strategies to scale for business success could be when working with e-commerce sellers. Say their problem is getting product descriptions written for hundreds of products. By showing them how to calculate customer perceived value for their products, you can demonstrate the value of your services.

Create a Simple Comparison Table

Help customers visualize these costs with a simple comparison table:

This is a perfect way for customers to visually “see” the price they’re paying for not doing anything to solve their pain. If your solution (what you’re selling) is $2000/year—it doesn’t take a marketing expert to see how great that deal is. Understanding the perceived cost can make all the difference.

Unleashing the Power of Psychology for Budget-Minded Marketers

What’s awesome is that sometimes we can shift our customers’ perceptions without making major product or service changes. Research has actually proven this. There are all sorts of simple psychological tweaks that can skyrocket your customer perceived value definition, helping to set you apart in crowded markets, which as a solopreneur, let’s be real—your market is crowded no matter what it is these days. Here’s how to increase perceived value in the minds of your customers.

Tapping Into The Magic of Scarcity

You can add value to your services by creating a perception of exclusivity through various marketing campaigns. Even the mention of the phrase “customer experiences” could entice people to book you more because people feel they are part of something. A few simple ways you can incorporate this idea are to:

• Use time-sensitive language on offers. Think phrases like “limited time offer” and “only 5 spots left.” We saw this in action with the Playstation 5 launch. People were paying double the retail price because of how hard the product was to find.
• Another way is to offer special “limited-edition” packages. That new website redesign? Create lead generation packages based on exclusivity, with bonus VIP components.
• In-person events? This is a perfect opportunity to leverage scarcity. Think things like a special in-person workshop that you’ll only offer a few times a year.

Leveraging the Power of Social Proof

People tend to look at what others are doing to make decisions, because if everyone is raving about something it’s gotta be good, right? Understanding the value perceived by customer is crucial.

McKinsey is an excellent example of a company that leverages their social proof to charge more. Sure there might be other companies who offer consulting at a lower rate, but they haven’t reached the reputation and social proof to command what McKinsey does.

Simple, Effective Ways to Increase Social Proof

• Create an amazing testimonials page. Share what happy clients are saying about their “Aha.” moment when working with you.
• Actively ask for reviews and then share them everywhere. This includes on social media and even on print marketing collateral (if you use it).
• Guest post on high-authority blogs. Sharing your insights with a wider audience on popular blogs, like Influence Logic’s positions you as a credible source, driving brand visibility and recognition
• Share links to mentions or press coverage (even if it’s local.). Get to know your local influencers. By building your social circle you’ll naturally get more “word-of-mouth” press.

Highlighting Effort & Investment

Don’t be afraid to explain the time, energy, research, testing, and skill that go into what you’re creating. Because the truth is people pay for those years you’ve spent becoming an expert. Highlight the behind-the-scenes efforts on social media, giving customers a peek behind the curtain. Share photos or video of your creative process, highlight interesting research you’re using to create your product or service, and explain how your background and training influences your process. If relevant, talk about failures and obstacles you’ve overcome, highlighting your resilience and persistence, while building an emotional connection. By doing so, you can demonstrate the actual cost of your product or service and increase perceived value pricing examples.

Price Increases + Scarcity & Demand

Increasing your prices (in tandem with the strategies discussed above) will help increase perceived value. If a higher price point is a roadblock, maybe those costs aren’t clearly spelled out. Perhaps an increase would be perceived more favorably if presented as improving customer experiences. If your company has the ability to raise prices without a decrease in sales, there are even more ways you can help increase retention. Employees can really help to shape customer experiences to create a ripple effect, so focus on those initiatives to continue to scale growth.

Strategic Markdowns + Promoting “A Good Deal”

In the research we talked about a software package being marked up to $50 and then putting it “on sale” for 50% off. Sometimes customers get a “thrill” of a great deal even when, technically, it’s not. Strategic use of a sale like this works especially well for solopreneurs who might offer e-books or courses online. This is an example of perceived value pricing.

There was even research that studied painkillers and whether they were branded or not. You wouldn’t believe that branded painkillers actually were more effective than unbranded. This is a pretty compelling study when analyzing why some products are perceived as more valuable. Maybe creating branded materials or swag is a better approach than buying bulk white-label goods. This is an important aspect of customer perceived value definition and example.

Appealing to Emotion & Social Value

It’s true what Warren Buffett says: “Price is what you pay. Value is what you get.”

The examples discussed throughout really drive that message home. It’s not enough to create a technically brilliant product. To win in competitive markets, you have to look beyond purely functional benefits and tap into those deeper emotions. We humans are complex beings who crave meaning and connection. We yearn for that warm feeling of belonging, of having something others admire.

Solopreneurs with an established target market can look for ways to incorporate the character of the company as a value proposition to increase loyalty, while simultaneously generating sales.

Uncovering What’s Valuable to Your Customers

As a solopreneur you really have the advantage to go straight to the source and ask questions to find out exactly how to up your perceived value game.

Crafting Targeted Surveys & Questions

• Run short surveys on your website or email list: Simple questions are all it takes. Ask things like:
  • “What’s the one thing you value most about our product/service?”
  • “How has using our product made a difference in your life?”
  • “If you had to pay triple the current price for this service, what feature would make that price worth it to you? “
• Directly chat with your existing customers, because after all you should be making a consistent effort to build stronger customer relationships. Even something like a customer-centric company podcast that includes audience participation can help. Hop on quick calls and find out what those aha moments were when working with you. This goes a long way because there’s no question that 64% of customers choose a company whose values align with their own, based on the 2020 Edelman Trust Barometer report.
• Keep an eye on social media and reviews. What are people saying about your business? Look for instances of brand perceived value.
• Analyze reviews of your competitors. This gives insight into things customers are raving about or issues they wish would be fixed— giving you an inside edge when adjusting your approach.

Think back to episode 62 of the Perceived Value podcast and how Sarah’s chance encounter and conversation with Tom resulted in an “Aha.” moment. Because a chance conversation revealed that the non-profit Tom was affiliated with had a huge value mismatch. And you can actually check out the interview. A solopreneur doesn’t even need to book interviews because a casual chat might result in that game-changing tip. In fact, these tips work well even on a limited budget. So don’t underestimate casual encounters with ideal customers. Remember, marketing perceived value is about understanding and meeting your customers’ needs and desires.

Examples of Businesses Boosting Customer Perceived Value

These can be big companies, or even solopreneurs that started small, and were successful:

• Hubspot’s free scheduling tools. By taking the “pain” out of manually setting up meetings, it streamlined this part of doing business.
• Using personalization in sales by including something unique and memorable (for a potential customer), even something like a drawing for a big company might seem like a pain, but the perceived value outweighs any “cost” you have to invest. By adding that personal touch, you’re enhancing the product’s perceived value.
• Etsy – You could analyze thousands of products that range from inexpensive homemade goods to exclusive artisan items, even high priced vintage items, you’ll see an amazing example of perceived value based on a product. You’ll even see how the product presentation can influence this.

FAQs about perceived value

What is the meaning of perceived value?

It’s simply what customers believe a product or service is worth. This goes beyond the actual price. This involves looking at the functional and emotional benefits. And as you read earlier, psychology also has an influence, especially for luxury items. Think those designer handbags being increased by about 7%, and sold even in a global recession, according to a recent article published by The Wall Street Journal. It also takes into consideration things like ease of purchase, reputation, customer service, scarcity, and how their peers perceive the item, which ties into the concept of social selling. By paying attention to social trends and utilizing these concepts, sales can improve just based on building a wider social circle. It’s about understanding the customer’s perception of the product’s price.

What is an example of perceived value?

You see these all around you, especially if you pay attention to sales and how things are marketed to you. The next time you’re online or listening to a commercial, think about these common examples:

• Think of caviar. At one point you might be surprised to know it was free. Saloon owners gave this salty treat away in the late 1800s in the hope customers would then drink more beer. But it goes deeper than this. As the product’s price went up it became a “status symbol”. This shift in perception, from a free snack to a luxury item, illustrates the power of perceived value.
• Another example we talked about was the Playstation 5 launch where customers paid far more because the product was difficult to find. Those who scored a PS5 at retail value felt like they found “a deal” (even though that was its retail value.) because there was such a demand. Now you see something similar with “limited edition” product launches for beauty products, designer clothing lines, and even sneakers. These examples demonstrate that perceived value can influence what people are willing to pay.

What does a high perceived value mean?

This means that people are happy to spend more because they believe what you are offering is truly a “great deal.” They feel like you understand them and are providing a product or service that’s exactly what they’ve been searching for, making it even more likely that they will choose you. Another aspect is repeat customers. By increasing customer satisfaction you can improve sales growth because these customers will be more inclined to refer friends and family. High perceived value increases sales. If the customers believe your product is scarce and exclusive, even negative customer reviews have less of an impact because these satisfied customers perceive something amazing and difficult to come by.

How do you use perceived value in a sentence?

If you want to use the term properly, remember that sometimes perceived value might not make sense (based on logic alone) – so focus on using examples. Try sentences like this:

• The new line of handbags by Designer X has a high perceived value due to their limited availability, and high-profile endorsements from A-List celebrities, who shared these social media tips for increased sales. The brand has successfully cultivated an image of luxury and exclusivity, resulting in high perceived value.
• Even though Restaurant B serves pasta at twice the price of their competitors, their long waitlist creates a perception that the food is incredibly delicious. Although from the perspective of a traditional service experience, the strategy may backfire since wait times are directly impacted. Despite the higher price and longer wait, customers perceive the food to be of higher value.

Conclusion

Perceived value really is more art than science because after all you’re dealing with real-life humans. It boils down to figuring out what truly makes a difference in their lives and then letting them know exactly how you will be providing that.

In this quick article, I’m going to give you everything you need to run this simple campaign — no matter what type of business you run.

Why run birthday marketing campaigns

Your customers don’t know about all the cool things you sell. And that’s the main reason to run birthday campaigns. I like to call this a “Birthday Bonus Campaign” for exactly that reason. Birthday marketing important for building customer relationships and achieving higher transaction rates.

A birthday bonus campaign it’s a great way to give your customers a free gift that is related to something that they are already buying. It’s like an “if you like this, then you’ll love that” idea.

Not only that, but birthday marketing campaigns are the perfect opportunity to show them how much you appreciate them and it’s just plain fun to celebrate with your customer.

What you need to get started

Here’s what you’re going to need to create your very own Birthday Bonus Campaign.

• A list of customers with their birthdays. If you don’t have their birthdays, you can collect them via Facebook, you can simply start asking customers either via email, a phone call or the next time they come in. If you have an in-person business such as retail or restaurant, you can also have them show proof that it’s their birthday with a driver’s license. Utilizing customer birthdays as a powerful marketing tool can enhance customer loyalty through personalized offers and greetings.

• Other customer contact information. At the

• An offer or discount that includes a product or service you want to feature as a complementary purchase. You’ll have to be familiar with your customers, what they purchase and what they should purchase but don’t.

• A way to track results. This will vary depending on your business. I’d recommend that you use your CRM to track these campaigns.

How to set up your campaign goals

1. Your first goal needs to be to choose a product or service that your customers should be buying but aren’t. This product or service should ALSO be high profit for you (in other words, cheap and easy for you and high value to your customer)

2. Select a group of customers for whom this is a good fit. If you have an email list or CRM that has listings of the products or services that customers buy, you’ll be able to pull that list and put them inside of a segment. You can “tag” them as “2022 Birthday Bonus Campaign”

3. Set a goal for how many of those customers you want to take you up on your offer.

Creating a Memorable Birthday Experience

Photo by Nick Fewings on Unsplash

Everyone enjoys feeling special on their birthday, and businesses can capitalize on this by offering memorable birthday experiences. Imagine your customers looking forward to their birthday treats from your business every year! Offering a special birthday gift can create anticipation and excitement, enhancing the overall customer experience.

Personalized greetings, customized offers, and attention to detail are crucial for a successful birthday marketing campaign.

1. Create Memorable Experiences

To create an unforgettable experience, consider adding a personal touch to your customer’s birthdays. Singing Happy Birthday, offering a free cake or dessert, and decorating the area with balloons, banners, lights, and Instagram-worthy props can make your customer’s special day even more memorable. These small gestures show that you care about your customers and are willing to go the extra mile for them.

Making your customers feel special is a great way to build loyalty and increase customer satisfaction. It’s also a great way to show your appreciation for their business. By taking the time to take the time.

2. Personalized Greetings

Sending personalized birthday messages can make your customers feel truly special. Address them by name and tailor promos with age-based discounts to show that you’ve put thought into their birthday celebration.

Surprise birthday promos can also motivate customers to leave good reviews and spread the word about your business. Remember, it’s the thought that counts, and a heartfelt birthday message can go a long way.

3. Customized Offers

Customized offers can also make your customers’ birthdays unforgettable. For example, you could offer a free birthday meal for the person and three friends, a complimentary bottle of champagne, free delivery on their birthday, or even a 50% off coupon.

These personalized offers show that you value your customers and want to make their birthdays a memorable experience.

4. Attention to Detail

Paying attention to small details can make a significant difference in creating a memorable birthday experience. Simple gestures like singing Happy Birthday, offering free cake or dessert, and helping people celebrate their birthday at home with a delivery-only birthday box can leave a lasting impression on your customers.

These thoughtful actions show that you truly care about your customers and want to make their special day an unforgettable one.

Offer Birthday Email Discounts

Implementing a birthday email strategy is an effective way to encourage customers to purchase your products or services on their special day. These discounts can be tailored to your customer’s preferences and can include percentage-off deals or freebies with purchase.

By giving your customers a reason to shop with you on their birthday, you can boost sales while making them feel valued and appreciated.

5. Run a Birthday Countdown Email Series

A birthday countdown email series, a crucial part of birthday marketing emails, can build anticipation and excitement leading up to your customer’s special day. These emails can include exclusive offers, sneak peeks at new products, or fun tidbits about your business.

By creating a sense of urgency and excitement, you can motivate your customers to engage with your brand and take advantage of your birthday offers.

6. Send a Free Gift Birthday Email

Sending a free gift birthday email is an excellent way to show appreciation to your customers on their special day. When you send birthday marketing campaigns, it is straightforward and does not require coding knowledge. This simple gesture can create a marketing opportunity by offering a free product or service that your customers may not have tried otherwise.

Not only does this help to strengthen the relationship between your customer and your business, but it can also lead to increased sales and customer loyalty.

7. Exclusive Birthday Event Invitation Email

Invite your customers to an exclusive birthday event where they can enjoy special offers and activities tailored just for them. This email should include all the necessary details about the event, such as date, time, location, and any special instructions.

By hosting an exclusive event for your customers, you can create a memorable experience that will leave a lasting impression and encourage them to continue engaging with your brand.

I’m going to keep this birthday email campaign super-simple. I’m NOT going to push you to send birthday emails every day. You can do that, but let’s start simple.

Each month, you’re going to run this “Birthday Bonus” campaign for those customers that have birthdays during that month.

You’ll want to send 4 emails each month; one email each week.

Birthday Email Week 1: At the beginning of the month send a birthday email to each of your customers having a birthday that month.

Make sure to tell them a story of WHY you are doing this. Maybe you just had a birthday and nobody noticed. And this made you feel forgotten and unappreciated. And that you didn’t want ANYONE else to feel that way.

Maybe include a picture of yourself with a sad face. You can also insert a gif. Pretend that you’re writing to a friend.

Tell them that you’re going to be celebrating all month long. Insert what they are purchasing from you and then tell them that you’re giving them a “BIrthday Bonus” featuring the product or service you identified that you’re going to feature either that year.

Tell them that you’re giving them either a free product or service or a sample (trial access) to that product or service until the end of the month and that you hope that they’ll give it a try.

Also tell them that they can reach out to you any time with any questions or help they might need. You can go further and say that you’ll check in with them.

Birthday Email Week 2: Remind them that they have access to this awesome product or service.

Tell them that if they like it, they can get it at a discount for a specific period of time.

You can also give them the option to purchase a set amount of this product or service at a discount.

Remind them that the deal is going away and you don’t want them to miss out.

OH — and ask them to reply to this email if this “gift” or Birthday Bonus is a bad match and they don’t need or want it. This is critical information for you.

Birthday Email Week 3: Tell them that their birthday month is almost over. Remind then to take advantage of the offer and if they don’t like the offer to PLEASE call and let you know. Maybe they want something else. Find out what that is.

Birthday Email Week 4: This is the time to remind them to keep celebrating. Don’t forget to make this personal and bring your personal experiences and stories into this email. You can even be a little “selfish” about it, and tell them that you want them to think of you every time they use this product or service. (Tongue in cheek).

Remind them that the offer is ending and that they’ll have to wait until their next birthday to get a deal like this.

Most marketing automation tools will have a birthday email feature. Here’s an article that explains how MailChimp does it.

Direct Mail Birthday Bonus

Email is a little faster, easier and cheaper. BUT snail mail can be insanely more powerful – especially if you do this.

Send your customers an actual letter in a regular business envelope. Write them a nice birthday message and include a gift card or promo code for access to a complementing product or service. A simple happy birthday message can show care, but adding a special offer enhances relationship management and customer experience.

This is powerful because these customers will be blown away by your generosity, they will try this new thing you want them to try and — here’s the best part, they can share it with a friend.

How to Collect Customer’s Birthdays

I know what’s stopping you, you probably don’t have “birthday” data. If you like the sound of this campaign, then take the time to collect that data.

1. Send an email and tell them that you have a gift for them for their birthday and you want them to respond with their birthday.

2. Create a form using your marketing automation tool and ask them to fill it out.

3. You can look up your customers on Facebook to see if it shows their birthday.

4. Call your customers and ask for their birthday.

Now that you’ve seen this, I hope that you’re inspired to collect emails and birthdays from your customers.

The process of running a “Birthday Bonus” campaign, including sending personalized birthday greetings, is an effective way to introduce existing customers to products and services you offer that they didn’t know about. This can help them discover new things from your store, which in turn may lead to more sales. If you follow these steps, it will be easy for you too!

Social Media Celebrations

Social media celebrations are a fun and interactive way to celebrate your customers’ birthdays. By giving public shout-outs, creating personalized birthday videos, running hashtag campaigns, and offering exclusive social media offers, you can make your customers feel special and appreciated.

These celebrations can also help to increase brand awareness and customer engagement, making them a valuable addition to your birthday marketing campaign.

8. Public Shout-outs

Recognizing your customers on social media for their birthdays is an excellent way to show appreciation for their loyalty. These shout-outs can include personalized messages, images, or even videos.

By celebrating your customers’ special day on social media, you can create a sense of community and encourage others to engage with your brand.

9. Create a Personalized Birthday Video

Photo by Blue Bird on Pexels

Creating a personalized birthday video for your customers can make them feel truly special. You can include photos, messages, and even animations to make the video unique and memorable.

By taking the time to create a personalized video, you can show your customers that you genuinely care about their happiness and are willing to go the extra mile to make their special day unforgettable.

10. Hashtag Campaigns

Photo by Walls.io on Pexels

Running a hashtag campaign for your customers’ birthdays can help promote your birthday offers and increase engagement. By encouraging your customers to share their birthday celebrations using a specific hashtag, you can create a sense of community and generate buzz around your brand.

This can also help to increase brand awareness and attract new customers.

11. Exclusive Social Media Offers

Photo by Pixabay on Pexels

Offering exclusive social media offers on your customers’ birthdays is a great way to reward them for their loyalty. These offers can include discounts, freebies, or even access to exclusive content.

By providing special offers through social media, you can create a sense of exclusivity and encourage your customers to continue engaging with your brand.

In-store and Online Birthday Promotions

In-store and online birthday promotions are an excellent way to boost sales and increase customer loyalty. By offering discounted products or services, loyalty points multipliers, free gifts with purchase, surprise gifts, free birthday sessions, free upgrades for a month, buy one get one free deals, and hosting birthday parties, you can create a memorable experience for your customers and encourage them to keep coming back.

These promotions can be tailored to the individual customer, making them feel special and appreciated. They can also be used to reward loyal customers and build relationships with new customers. By offering discounts.

12. Discounted Products or Services

Offering discounted products or services on your customers’ birthdays is an effective way to encourage them to make a purchase. These discounts can be tailored to your customer’s preferences and can include percentage-off deals or freebies with purchase.

By giving your customers a reason to shop with you on their birthday, you can boost sales while making them feel valued and appreciated.

13. Loyalty Points Multiplier

Reward your customers for their loyalty with a birthday loyalty points multiplier. This can range from 1.5x to 5x the regular points, incentivizing your customers to make a purchase on their birthday. Some loyalty programs even give extra points on the anniversary of the customer’s first purchase.

By offering a points multiplier, you can show your customers that you appreciate their loyalty and motivate them to continue shopping with your business.

14. Free Gifts with Purchase

Incentivize your customers to shop on their birthday by offering free gifts with purchase. This can include items such as a free food or drink, a complimentary service, or even a small gift card.

By providing a free gift with purchase, you can create a memorable experience for your customers and encourage them to continue shopping with your business.

15. Give Surprise Gifts

Surprise your customers on their birthday with a special gift. This can include a free upgrade for a month, a free birthday session (consultation or service), or a buy one get one free offer for the day, week, or month.

By offering surprise gifts, you can show your customers that you appreciate their loyalty and create a memorable experience that will leave a lasting impression.

16. Free Birthday Session (Consultation or Service)

Attract new customers by offering a free birthday session, such as a consultation or service. This can help introduce your business to potential customers and give them a taste of what you have to offer.

By providing a high-quality experience during the free session, you can increase the chances of converting these potential customers into loyal patrons.

17. Free Upgrade for a Month

Reward your customers for their loyalty by offering a free upgrade for a month. This can include a free upgrade to a higher tier of service, a free month of access to a premium service, or any other type of upgrade that’s free for a month.

By offering a free upgrade, you can show your customers that you appreciate their loyalty and encourage them to continue shopping with your business.

18. Buy One Get One Free for the Day, Week, or Month

Increase sales with a buy one get one free promotion for your customers’ birthdays. This can be offered for the day, week, or month of their birthday, depending on your business model and goals.

By providing a special deal for your customers on their special day, you can encourage them to shop with you and create a memorable experience.

19. Host a Birthday Party and Provide Special Gifts

Create a memorable experience for your customers by hosting a birthday party with special gifts. This can include customized party favors, themed decorations, and engaging activities for guests.

By hosting a birthday party for your customers, you can create a lasting impression and encourage them to continue engaging with your brand.

Collaborating with Partners for Birthday Deals

Collaborating with partners for birthday deals is an excellent way to create unique experiences for your customers while also expanding your reach. By partnering with other businesses, you can offer cross-promotions, joint events, co-branded merchandise, gift card exchange, joint loyalty programs, and birthday treasure hunts.

These collaborations can help boost brand awareness and customer loyalty, making them a valuable addition to your birthday marketing campaign.

20. Cross-Promotions

Collaborate with other businesses to cross-promote your birthday offers. This can help both businesses reach a wider audience and increase sales.

By working together, you can create a unique and memorable experience for your customers that will leave a lasting impression.

21. Joint Events

Increase brand awareness and customer loyalty by hosting joint events with other businesses. These events can include special offers, engaging activities, and unique experiences that cater to your customers’ interests.

By collaborating with other businesses, you can create memorable experiences for your customers and encourage them to continue engaging with your brand.

22. Co-branded Merchandise

Create unique products and experiences for your customers by partnering with other businesses to create co-branded merchandise. This can include items such as clothing, accessories, or even special edition products that feature both business logos.

By offering co-branded merchandise, you can create a memorable experience for your customers and increase brand awareness.

23. Gift Card Exchange

Increase sales and customer loyalty by offering a gift card exchange program. This allows customers to trade in their unwanted or unused gift cards for ones from your business.

By providing this option, you can encourage customers to shop with you and create a memorable experience.

24. Joint Loyalty Program

Reward customers for their loyalty with a joint loyalty program. This program can include special offers, discounts, and other benefits that are exclusive to members of both businesses. By offering a joint loyalty program, you can show your customers that you appreciate their loyalty and create a memorable experience that will leave a lasting impression.

25. Birthday Treasure Hunt

Photo by Roman Kraft on Unsplash

Engage customers and increase sales with a birthday treasure hunt. Partner with other businesses to create a fun and interactive experience for your customers. Hide birthday deals in different locations and provide clues for customers to find them.

By creating an exciting treasure hunt, you can create a memorable experience for your customers and encourage them to continue engaging with your brand.

Summary

In conclusion, creating memorable birthday experiences for your customers can significantly boost your sales and customer loyalty. By implementing engaging birthday email campaigns, social media celebrations, in-store and online promotions, and collaborating with partners for unique birthday deals, you can provide unforgettable experiences that your customers will look forward to every year. So why not start planning your next birthday marketing campaign today and make your customers’ special day even more extraordinary?

Frequently Asked Questions

What is the birthday marketing strategy?

Birthday marketing is a great way for brands to engage with customers on a personal level and thank them for their loyalty. It involves giving away a freebie on the customer’s birthday or during their birthday month.

Feb 6, 2023.

What are good ideas for a birthday?

Celebrating your birthday at home doesn’t have to be boring! With a bit of creativity and some unique ideas, you can throw a memorable birthday party without ever leaving the house.

There are plenty of ways to make your home birthday party special. You can decorate the house with balloons and streamers, create a fun playlist, and more.

How to promote birthday party business?

Put yourself out there! Talk about your business to anyone you meet. Connect with local daycare centers, preschools, churches, and synagogues and offer discounts for birthday parties. Consider online advertising platforms such as Google Ads or Facebook Ads. Finally, creating a website that highlights your services can increase visibility for your business.

To promote your birthday party business, use word of mouth to spread the word, advertise on online platforms, reach out to local daycares, schools and churches, participate in community events, give away promotional items and create a website. Let parents and guardians know you’re available to provide fun-filled birthday experiences for their children. With these tips, you can successfully get the word out about your business.

• How much money does an author make per book?

• Whether you write books on how to make money or romance novels, this advice is actionable.

What’s the difference between authors and writers?

There is a big difference between authors and writers. Authors are people who write books, while writers are people who write for a living. Many times, authors are also journalists, bloggers, or screenwriters.

Do writers make good money?

YES! Writers often make more money than authors. I haven’t found any formal statistics on this topic, but in my 25 years experience in online publishing, I can tell you that writers who specialize on a topic will make more than general writers.

For example, an industry expert writer can make as much as $500 per 1000 word articles. Assuming that their content is high quality.

In this article, I’m going to focus on book authors. So, if that’s you, you’ll learn about the best ways to make money from your book.

As a regular book reviewer for Small Business Trends, and someone who helps authors market their books, I’ve found one trend that has been steadily increasing. Now more than ever, authors are expected to market their own books, regardless of whether they were published by a traditional house or self-published.

That means that you’re not only expected to be an author, but a marketer as well.  Now that we have that out of the way — it’s time to talk about money!

How Much Money Do Authors Make?

When it comes to earning a living as an author, the numbers can vary quite a bit depending on how you publish and where you are in your writing career. According to the Authors Guild’s 2023 survey, the average author makes about $6,080 a year from their books.

That number jumps to $20,300 if you’re writing full-time. If you’re self-publishing, though, the income is usually lower, averaging around $1,000 a year. On the other hand, if you go the traditional publishing route, advances start around $5,000 with the big publishers and $3,000 with smaller ones.

The publishing process you choose also impacts how much you make per book. Self-published authors typically get to keep 40% to 60% of their book’s sales, which works out to about $5.74 for a book priced at $14.99. Meanwhile, traditionally published authors usually see around 10% to 12% royalties, which means they’re making closer to $1.79 per book at the same price.

If you’re one of the lucky self-published authors earning top-tier royalties, you could be making up to 70%, which can really add up over time. So, whether you go the self-publishing or traditional route, it’s all about finding what works best for your financial goals and how you want to approach your writing career.

How much do best selling authors make per book?

A best selling author can make about $3.50 for every book they sell. So, if you wanted an author salary of $200,000 per year, you’d have to sell more than 57,000 books every year.

A traditionally published best selling book makes 5-20% royalties for the author on their print books.

Can You Make a Living as an Author

Most people assume that there are two types of authors when it comes to money, best-selling authors (like J.K. Rowling or Dan Brown) who get millions of dollars in their publishing contract or the struggling author who only gets income when he bribes a family member to buy a copy.

The truth is, there isn’t a fixed number you can estimate because there are a lot of factors that go into an author’s potential income. There are a few authors who make millions, more that make thousands, and a lot more that can’t reach the $500 threshold. Some authors even lose money. The traditional publishing industry has evolved, providing more opportunities for authors to earn a living through self-publishing avenues.

In order to understand whether you can make a living as an author, it’s helpful to examine different types of books and the people who write them.

• Fiction writers. The most famous writers of fiction, like Tom Clancy, JK Rowling, or Stephen King, make millions of dollars from their books. They enjoy large advances from traditional publishing companies that allow them to support themselves exclusively by writing fiction. However, they are a tiny minority of the people who want to make a living writing fiction, and it can take decades of work and luck to achieve that kind of success in traditional publishing. On the other hand, many fiction writers earn a living writing full time by self-publishing e-books and marketing them directly to readers. They may never get famous, but they can earn a steady $5,000-$8,000 per month.

• Non-fiction writers. When people think of “authors”, they often think of famous novelists. However, Dale Carnegie’s How to Win Friends and Influence People continues to sell over 250,000 copies a year, a hundred years after it was written. Non-fiction writing can be a great way to make money, particularly if you can offer useful, meaningful information to your readers. Subjects like health and wellness, money and finance, and dating and relationships can help authors earn up to six figures a year.

• E-books as digital products. Today, there is a specialized form of non-fiction writing that is specifically focused on a product. For example, an instructor may sell online courses and create an e-book as part of the course material. An entrepreneur may create an e-book as a testimonial or marketing collateral for their products and services. A business may produce an e-book as a free gift to new or returning customers. In these cases, the book is a component of a larger business or marketing strategy, and can be a powerful way to meet those business objectives.

As an author, it is up to you to determine how to profit from your hard work. For some people, just publishing a book is enough. Most authors, however, wouldn’t mind earning some cash for their words.

How Do Authors Make Money?

Authors typically make money either through a traditional book publishing company, or through a self-publishing marketplace. In either instance, the author earns money based on how many copies of the book are sold. In traditional publishing, the company often gives a writer an advance on their book, so they can cover their cost of living while they write, and then they repay the advance from royalties on the finished book.

Some writers also choose to be ghostwriters, where they earn a flat fee for writing the book, then allow the person who hired them to claim authorship and earn revenue from the book sales. Let’s take a closer look at the two main methods authors use to make money.

Your first step is to learn how to get that cash. As an author, there are two basic ways you earn money, from book sales or stuff you sell based on your book’s content.

Method 1: : Direct Book Sales with Traditional Publishing

[tweet_dis]Authors earn money from their book sales in two ways, royalties and/or an advance[/tweet_dis].

What is a book advance?

An advance is money that is given to an author from a publishing company before the book comes out. Advances are usually given to authors who have a track record of publishing best-selling books or have a very high possibility of becoming a best-seller. Only authors with a publishing contract can earn advances.

For an average author with a first-time book deal, receiving an advance is very rare. It’s usually $5,000 to $20,000. It’s called an advance because you have to pay it back with your book sales.

The average author with a first-time book deal can expect to receive an advance of $5,000 to $15,000. Once your book is released, you won’t see another dime until you have earned back that advance–$1.25 at a time—until the advance is paid back in full.

What are royalties?

Both self-published and authors working with a publishing company can earn royalties. Royalties are money given to an author after a book is published and sold. As an authors, you receive a percentage of the sale, depending on how you published your book.

If you work with a publishing company, a part of your royalties must go the publisher, an agent, and then you. If you are a self-published author, you still have to pay the company that helped your book get published. In many cases, this is Amazon. By ditching a professional publisher, you get a higher percentage of your book sales.

Another strategy to make more money on direct book sales is to create your book in different formats. This includes  digital, paperback, hardback, and audio.  This will help you reach a larger audience, because each consumer chooses the format they’re more comfortable with.

How much do authors make per book?

On average, traditional publishing houses pay authors $1.25 per copy sold. Clearly, you’ll need to sell a ton of books to earn a nice paycheck for your work. Of course, with a large publishing house backing your book, you may have no problem selling tons of inventory. One other thing to consider–that $1.25 per book–is only yours after you’ve covered the cost of your advance.

Alternatively, most self published authors are paying $5 to a company like Amazon per copy of their books sold.

How do you know which is right for you? Let’s assume your book retails for $20. If you go through a publisher, you’re getting $1.25 per copy. If you self-publish you’re getting $15 per copy.

While the math makes self-publishing look like a better deal, keep in mind the benefits you may get with a major publisher–like their in-house PR team and editors.

Which genres make the most money for authors?

While there is a huge range of earning potential for different types of books, the genres that earn the most money are non-fiction health and wellness, money and finance, and dating and relationships. In fiction, the genres that earn the most money are:

1. Romance and erotica. Romance and erotica novels earn nearly $1.5 billion every year

2. Crime and mystery. Thrilling crime and mystery novels earn more than $725 million annually

3. Religious and inspirational. Inspirational texts earn about $720 million a year

4. Science fiction and fantasy. Sci-fi and fantasy novels earn about $590 million every year

5. Horror. Horror novels earn just under $80 million a year

While there’s no doubt that some genres have larger existing markets than others, it’s also important to remember that the success of a book is also based on a variety of other factors, and that authors who use smart marketing techniques have a much better chance of financial success, no matter which genre they write in.

Method #2: Generate Sales Based on the Content of Your Self-Published Book

Savvy authors look for income opportunities beyond their book sales. The major reason is the limited sales capacity of a book. After you sell a book, the transaction is over until you write another book. If, however, you sell things based on the book’s content, you have an unlimited number of ways to earn money.

What do I mean by earning income from your book’s content? Seven examples include:

• Product sales

• Speaking gigs

• Consulting

• Teaching

• Pre-sales

• Crowdfunding

• Special events and travel tours

There are several well-known authors who do all of these things. For example, look at Dave Ramsey. He’s famous for his books on how to make money, pay off debt, and create a legacy of wealth.

He parlayed the success of his first book, The Total Money Makeover, into multiple revenue streams. These include podcasts, live events, workshops, and digital courses. With a net worth estimated at $200 million, you can see he’s done great work marketing his books.

But, most of his income is based on his content, not the actual book copies. He makes his money from his online courses and advertising revenue for his radio show and podcasts.

How much money do authors make on ebooks?

Before considering how much money authors typically make on ebooks, it’s important to clear up some misconceptions about self-publishing. While it is possible to write and publish an ebook with no out-of-pocket costs, most successful self-publishing authors invest capital in their books in order to boost sales. Just like in traditional publishing, factors like cover art, writing quality, and page layout can influence sales.

In online marketplaces, ratings and reviews are incredibly influential, so creating a book that satisfies the reader is worth an up front investment. Successful ebook authors hire editing services, book cover designers, professional formatting, and typically invest in marketing and paid advertising, all of which cost money that impacts the total profits of the book.

Every ebook publishing platform has different revenue agreements with authors. Retailers like iBooks, Kobo, Barnes & Noble/NOOK, and the like, all offer different royalty rates. These platforms also reach different markets on different devices, which affects a writer’s target audience. Despite all these differences, authors can expect to earn 40 – 70% of the cover price for every copy sold, which often amounts to ~$1.25 – $2.00 per copy.

How much money do authors make per book on Amazon?

Amazon controls about 80% of the ebook market, which makes it almost impossible for authors to ignore. Amazon’s publishing agreement is multi-layered and should be read carefully. Broadly speaking, authors agree to give Amazon exclusive distribution rights to their book, in return for access to a preferred Kindle marketplace and participation in the Kindle Lending Library. A standard Amazon agreement usually offers authors royalties of 35 – 70% of the cover price per copy sold.

Kindle Unlimited and Lending programs pay authors by the number of pages read, rather than by the number of book copies sold.

People who want to create physical copies of their book can also use Amazon’s CreateSpace to create paperback copies of their book for distribution in physical bookstores and access to an expanded paperback marketplace through Amazon’s programs. The CreateSpace agreement usually charges authors a fixed fee, a per-page cost, and Amazon’s commission of 40-60% per copy sold.

More than 40% of the authors on Amazon are self-published ebook authors, and only about 1% of them earn more than $10,000 per year. On the other hand, there are many success stories of authors who are happily working as full time writers and supporting themselves through Amazon.

Is self-publishing or traditional publishing right for you?

If you dream of becoming a full-time author, you may wonder whether you should pursue traditional publishing or self-publishing. Here are some of the key factors to consider:

Traditional book publishing:

• Harder to get into. The book publishing industry is most interested in books with broad appeal and high commercial potential.

• Slower to achieve results. It can take years to create a book from initial treatment through to bookstore shelves. It can take even longer for a traditional book to start earning royalties that are paid to the author. New authors typically receive only small book advances, so expect to maintain a part-time job to cover your cost of living for quite a long time.

• More prestigious. Traditionally produced books are more visible and more prestigious, and traditional book authors are more likely to go on book tours, earn award nominations, and have more media visibility.

Self-publishing:

• Fewer barriers to entry. Instead of trying to secure an agent and get a publishing deal, authors can simply write their books and publish them.

• Narrower audience. Self-published books can be a faster and more effective way to target specific audiences and interest groups.

• Broader skill range. While traditional book publishers take care of the details of finishing a book, like editing, publishing, and marketing, self-published authors need to do that work themselves. Authors need to hire or design their own cover art, hire or do their own editing and proof reading, and manage their own marketing and advertising.

However, authors don’t always have to make either-or decisions. Famously, Fifty Shades of Grey and Eragon were originally self-published before they were picked up by traditional publishers. If you can’t decide which option is best for you, try discussing your book idea with a literary agent and exploring your options.

6 Creative Ways to Make Money from Your Book

1. Sell T-shirts, coffee mugs,  or other promotional items  with characters or phrases from the book on your website. You can also sell on sites like CafePress or Zazzle. If you’re particularly crafty, try Etsy.

2. Offer traveling tours where the author takes a group of readers through the places that inspired your book. Use a site like Vayable.

3. Set up a crowdfunding campaign on sites like Indiegogo to raise money for expenses.

4. Sell exclusive bonus material, such as additional or extra chapters, poems, or short stories through your website or Fiverr.

5. Get advertising income. Sell ads based on your book on sites such as Wattpad Futures. Or try earning through affiliate programs like Amazon Associates

6. Offer a fiction-writing workshop.

7. If you’re a nonfiction author, create and sell an online course. Or use one as a lead generator for your consulting services. Use sites like Udemy or Skillshare.

Book Marketing Ideas That Work

Unless you’re already a celebrity or best-selling author, traditional publishers will expect you to do a lot of the heavy lifting when it comes to promoting your book.  No matter what you’re writing; fiction, non-fiction, ebooks or even blog posts, if you want to make money, you’ll have to become a marketer.

Many authors feel lost when it comes to marketing their book and so they will hire a PR person to pitch and promote their book to reviewers and media outlets.

Follow these tips before you go out and hire any type of marketing or PR professional.  You’ll find that there are quite a few book marketing ideas that you can do yourself . For the ones that you’re going to delegate, you’ll be saving yourself a lot of time and money by already doing the bulk of the research and strategic work.

Understand that you’re in the marketing business, not the writing business.

This is helpful even BEFORE you sit down to write your first word.  When you think of yourself as being a marketer first and an author or writer second, you’ll immediately focus on what matters; your audience. What problem are they facing? And how you can help them solve it?

This is true for fiction writers as well.  John Locke, who has sold millions of ebooks on amazon and made more than a million dollars by selling $.99 books did it exactly this way.

He saw that many successful authors were charging almost $10  for a book and decided that he would undercut them – selling his own efforts for $.99 cents. Even in 2019, most of his books retail for $2.99. That’s far below average price.

Locke had a business background. He thought very carefully about who his ideal audience was, how they spent their days, what frustrated them and what type of content they would be most likely to consume.

Don’t get me wrong, it wasn’t an easy process. And he had his trial-and-error moments. But you can see that by simply writing from the context of your writing being a money-making venture rather than simply a creative exercise can be helpful.

Create a simple marketing plan for your content

You’re probably wondering why YOU should have to do this when you intend to hire a marketing expert to do this for you. You should do this yourself first SO THAT you can choose the right book marketing person or PR person who will help you make money from your book.

Here’s the template — Click on the image and then either download it for yourself or make a copy to your own Google Drive.

With this plan in hand, you’re ready to start playing around with some specific marketing ideas for making money from your writing.

Create a video trailer: A book is nothing more than a movie you play in your mind. Create a short video trailer to get people excited about your book.  You can use tools like Adobe Spark, Animoto or Magisto.

Do a virtual book tour: In addition to sending copies of your book to book reviewers and book review sites like Goodreads, create a list of podcasts, tweet chats, and Facebook live sessions..  Anywhere people are talking about your topic, you want to be there and you want to be there during a blast. This virtual tour should last 4-6 weeks.

Create a Facebook Group or Fan Page: Create a space where your audience, fans and potential readers can engage with you.

Build a website: You can create a simple book or author website on your own for less than $100.  Invest in great design, book image and head shots. Also provide some free content such as a table of contents, a chapter or two or even better — create a series of downloadable resources and tools for your audience.

FAQs

These items are just the tip of the iceberg because authors who know how to leverage their content make more money with less work. As an author, you’re not limited to sitting around and waiting for your book to make you money. You can use your book’s content to create income opportunities. The only limits are your time and imagination.

It’s become a hot topic with the mainstreaming of technology that tracks our movements, our orders, and then changes prices once a certain trigger is met. So if you think it’s complicated — it isn’t.

Maybe you think it’s something new. It isn’t. You’ve been paying dynamic prices for decades; airline tickets, hotels, Uber rides and more. That’s dynamic pricing, my friend.

Think about it? When was the last time you’ve seen prices printed on something? They’re out there, but tons of businesses have their prices online or on a screen and that means they can change those prices on a dime. (See what I did there?)

The real question is, should you use dynamic pricing to price your products just because you can?

What Is Dynamic Pricing?

Let’s put it this way, dynamic pricing is like playing the stock market for products and services. Basically it means that there’s a price range instead of a fixed price for a product or service depending on a variety of factors.

It offers flexibility over fixed prices. That means that businesses adjust prices based on factors like demand, competition, and even the time of day. This pricing method allows for optimizing revenue and profits by charging what the market will bear at any given moment.

But, this pricing model is a double-edged sword for both companies and consumers. This won’t surprise you, but businesses usually end up on the winning side of this equation, while consumers will often get stuck paying a much higher price because

Examples of Dynamic Pricing

Think back to that expensive Uber ride. You likely paid a premium due to high demand, allowing Uber to increase its prices. The same logic applies to airlines. As holidays approach, airfare costs surge because people are willing to pay more to travel during peak seasons.

This dynamic pricing strategy is common. According to eMarketer, 35% of retail sales are projected to occur on online marketplaces by 2027 — platforms like Amazon Marketplace, that use this pricing model. In 2022, airfare prices even jumped by 20% over Labor Day weekend.

Dynamic Pricing Is More Common Than You Think

The concept of dynamic pricing has been around for a while. However, this model gained traction in the 1980s when the airline industry began experimenting with it after government pricing regulations were loosened.

E-commerce retailers, such as Amazon, Walmart, and Best Buy, also commonly use it. They use sophisticated algorithms that monitor data sources like competitor prices, customer behavior, stock levels, and market trends to adjust their pricing strategies constantly. Tools like Price2Spy are becoming widely used.

But it’s not just e-commerce retailers, Kroger, the second largest grocery chain is already using dynamic pricing to adjust prices based on typical factors such as time of day, supply, demand and just for fun, the shoppers’ income or other demographic factors.

How Does Dynamic Pricing Work?

Dynamic pricing relies on data analysis and algorithms. Businesses consider numerous factors before adjusting prices, from the time of day to more complex metrics like demand elasticity, conversion rates, and competitor pricing.

Then, specialized dynamic pricing software analyzes this data to determine the optimal price points for different products.

McDonald’s and Burger King, Starbucks and Taco Bell, have been using dynamic pricing in a more subtle way. They often employ digital menu boards and app-based incentives to offer discounts and promotions during less busy times. This approach allows them to adjust prices without explicitly raising them during high-demand periods

When the word got out that Wendy’s was going to add dynamic pricing — the internet went nuts.

Is Dynamic Pricing Fair?

The fairness of dynamic pricing is subjective. Some businesses view it as a way to balance supply and demand while maximizing revenue.

If demand is high, a higher price reflects that. If people are willing to pay, it suggests the price is fair, simply responding to market dynamics.

However, critics consider it price discrimination, potentially violating the Robinson-Patman Act of 1936, which prohibits offering different prices to different buyers for the same product.

While customers do have the option of saving money, right now, they aren’t really seeing it that way.

Customer Perceptions & Impact on Consumer Trust

Dynamic pricing can confuse shoppers accustomed to fixed pricing. This model has sparked controversies, and businesses must handle these mixed customer perceptions carefully.

Initially, dynamic pricing generated negative publicity, like when Uber charged high prices during peak hours, outraging customers.

Now, there are articles out there, like this one from Wharton, that’s trying to sell consumers on the many benefits of surge pricing (like Uber practices), I’m going to call BS on that one. Because they are forgetting something that middle class consumers and small business owners have been dealing with for more than a decade.

Prices of everything have been increasing year over year, and while the inflation RATE has slowed down, prices continue to stay high while consumer (and entrepreneur) income has remained flat. And that means that money is tight for 99% of buyers.

In other words, if you’re a small business owner considering eeking out a few more profit dollars, I’d encourage you to tread carefully.

Strategies to Implement Dynamic Pricing Successfully

So let’s say you want to give this a shot. After all, a 1% price increase goes straight to your bottom line, so if there is even a prayer of adding a little more profit — should you?

Like all things marketing, you better have done your research. Start with understanding your customers. Understand their pain points, and what they are currently spending for the same desired outcome that you’re selling.

If you’re going to try dynamic pricing — you better do your homework — your math homework, that is. Think of it as a push and pull between profit maximization with customer satisfaction.

Let’s face it — you have to be transparent about this. And, again, don’t launch something unless you are more than 80% sure that you know exactly how your customers are going to react. Companies should clearly communicate pricing fluctuations on their website and during the purchase process. Explanations like, “Our prices vary based on demand, ensuring sufficient product availability,” can be helpful.

Businesses should consider offering price comparisons to show customers they’re getting a fair deal. Providing incentives and rewards, such as loyalty programs and advance-purchase discounts, helps offset the impact of dynamic pricing and strengthens brand loyalty.

Target Pricing & Specific Market Segments

Lufthansa Group uses continuous pricing to implement dynamic pricing. One approach is using a value-based pricing structure that segments pricing by location or purchase behavior. Airlines, for instance, segment customers into business and leisure travelers.

Business travelers are more likely to book last-minute tickets and accept higher prices. Airlines tailor their prices by adjusting the number of price points available in different fare classes based on reservation booking designators. This system is outlined here.

By charging lower prices for bookings made in advance and raising them for last-minute bookings, the goal is to improve revenue management. It attracts travelers who are less sensitive to fluctuating prices and reduces reliance on business travelers during economic downturns.

Pros and Cons of Dynamic Pricing

Dynamic pricing has advantages and disadvantages. Businesses must understand both sides before implementing it.

Pros: Benefits for Businesses

Cons: The Drawbacks of This Pricing Model

Dynamic pricing also has its drawbacks.

FAQs about Dynamic Pricing

What is dynamic pricing and what is an example of it?

Dynamic pricing means prices can fluctuate based on market conditions or demand. Prices don’t remain fixed but change in response to market trends. Businesses use it to fine-tune their pricing strategies flexibly.

For example, Uber ride prices often surge during bad weather or Friday night happy hours, demonstrating dynamic pricing in action.

Is this pricing strategy good or bad for the buyer?

Dynamic pricing has pros and cons for buyers. Savvy shoppers can find bargains during periods of low demand, saving money.

However, price-insensitive shoppers risk paying more for items in high demand. For example, if it’s a sweltering day, home improvement stores might raise fan prices, capitalizing on people’s willingness to spend.

What determines if dynamic pricing is illegal?

In many situations, dynamic pricing is legal, although it might not be popular with all customers. The Robinson-Patman Act of 1936 prohibits price discrimination.

Dynamic pricing strategies often leverage loopholes to adjust prices legally. However, selling gas at significantly higher prices during natural disasters might be considered price gouging, subject to different regulations.

Public sentiment plays a significant role in today’s world. Social media backlash against perceived price gouging can lead to investigations and potential prosecution, even if no technical price discrimination occurred.

What’s the difference between dynamic pricing and “price gouging?”

Dynamic pricing and price gouging share similarities, often involving price increases due to high demand, which can feel like gouging to some. It can be argued that these price adjustments are supply and demand-driven.

Price gouging, however, refers to excessively inflating the prices of essential goods, like groceries, gasoline, or emergency supplies, typically after disasters or emergencies when these items become scarce and consumers are desperate.

For instance, gas stations charging exorbitantly high prices during Hurricane Harvey’s aftermath were engaging in price gouging. States like Texas and Louisiana have laws against price gouging to prevent such practices.

But let’s be real, with prices already insanely high and incomes stagnant, dynamic pricing isn’t landing well with consumers with 44% of consumers seeing it as unfair and perceiving it as price gouging. Overall, consumers are willing to tolerate some dynamic pricing.

Why Consumers Hate Dynamic Pricing

Most of us can understand the idea behind dynamic pricing; corporations want to make more money and be compensated for extra effort or resources required and those consumers who really want something or have to have something specific at a certain time are willing to pay more.

So what is it about dynamic pricing that rubs us all the wrong way?

1. Unfairness and Price Discrimination: Dynamic pricing means different customers are charged different prices based on what they’re willing to pay. This can be annoying for customers who feel they’re being ripped off, especially in last minute bookings where prices are higher.
2. Lack of Transparency: Many customers don’t like dynamic pricing because it’s not transparent. They don’t understand why prices change so often or have access to the info used to determine those prices, so they feel manipulated.
3. Psychological Impact: Dynamic pricing can trigger loss aversion and anchoring. Customers feel anxious about missing out on deals or paying too much and get frustrated and leave businesses. Frequent price changes can damage trust as customers perceive businesses as dishonest.
4. Exploitation: There’s a fear dynamic pricing can exploit customers, especially during peak demand or for essential goods and services. This can feel manipulative or exploitative if customers feel they’re being charged unfairly during times of need.
5. Negative Sentiment and Alienation: Frequent price changes can create negative customer sentiment and alienation as customers see dynamic pricing as a sneaky commercial trick rather than a fair pricing strategy. This can lead to loss of customer loyalty and bad reviews.

So dynamic pricing can be a winner for businesses but a loser for customers if not done right.

How Can a Small Business Take Advantage of Dynamic Pricing Without Pissing Off Customers?

While this advanced, ai-driven style of dynamic pricing is going to be more popular as time goes on, as a small business that is looking to build positive goodwill with customers you have some simple ways of implementing dynamic pricing that will help you customers — and not hurt them.

Here are some other forms of dynamic pricing that consumers actually love:

1. Early Bird Specials: This isn’t just an option for events, you can use early bird pricing for courses, products or services that you want to “soft launch”.
2. Flash Sales: Pick an offer and run a flash sale for a certain period of time.
3. Coupons and Promo Codes: Everyone loves coupons and promo-codes and these are also time sensitive and driven by supply and demand.
4. Discount Days (based on attributes): Bars don’t do ladies night anymore, but all small businesses can offer discount days or times for different groups of customers. You can still have. “Family Night” where you create a family friendly environment ideal for parents with small kids. There are still Senior Discounts- and discount days for seniors. You get the idea. Identify a condition or target customer and give them a discount.

These are just four simple ideas, I’m sure you can think of more. The main point here is that you don’t need to have fancy AI that tricks your customer into paying more so you can pad your bottom line. I’m a big believer in transparency and your consumers will reward you for it.

Conclusion

With so many big corporations playing the dirty game of dynamic pricing, small businesses can stand out and capture those customers by keeping it real.

I just read this piece in the Harvard Business Review saying businesses should focus more on the mind games of pricing. But honestly, I think they’re missing a big piece of the puzzle. They’re assuming you’ve already got an awesome product or service, and all you need is a slick pricing strategy to make it sell.

As a business owner, setting prices comes with its own set of challenges and responsibilities. It’s crucial to ensure that our pricing strategies not only cover business expenses but also make a profit. Confidence in selling our products and services is key to business scalability and staying competitive.

Here’s my take: it’s time to step back and really look at what we’re selling. Are we delivering top-notch quality, reliability, and real value? That’s where our focus should be. And when your focus is there, you won’t have to compete on price.

We need to make sure our prices don’t just lure customers in, but actually back up a product they’ll love. It’s not just about making it easy for folks to buy; it’s about making them glad they did. Let’s talk about flipping the script and putting real value front and center.

Breaking the Price Barrier: Why Every Dollar Counts

I always say that if people are complaining about your price, they don’t know why they should choose you.

Let’s face facts, price is a critical factor, especially when your customers are balancing their checkbooks against their desires. We’re talking about a world where people weigh the value of every purchase against essential life needs. This isn’t just about affordability; it’s about making hard choices.

So, if you’re trying to compete on price, the solution isn’t in playing fancy games with pricing strategy, it’s something much more fundamental. Offering competitive prices does not necessarily mean sacrificing profit margins; it’s about differentiating yourself by providing unique value propositions and superior shopping experiences compared to your competitors.

Trust or Bust: The New Currency in Town

Sure, having enough cash to make a purchase is one thing, but there’s a bigger player in this game: trust. It’s about the confidence that your hard-earned money will bring the results you’re looking for.

Competitive pricing plays a crucial role in building this trust by strategically selecting price points based on competitor pricing, ensuring that customers feel they are getting value for their money.

In a world where you’re bombarded with choices, trying to compete on price often becomes a secondary concern. Let’s face it, out of the myriad options available, less than 1% truly live up to their hype.

So, the real deal-breaker isn’t just about price tags; it’s whether your product or service can fulfill its promises. With a backdrop of broken promises and unmet expectations, each buying decision for consumers feels like rolling the dice. Are they willing to wager their money on uncertainty? More often than not, they’re not ready to take that risk.

Pricing Strategies: Ditch the Psychology

Let’s dive into that Harvard Business Review article. This article is outlining 6 popular pricing strategies. And these are all valid if you don’t want to compete on price. What I think they fail to acknowledge is that psychological tricks aren’t going to guarantee conversions.

Let me say this another way – I don’t think psychological pricing tricks can overcome product or service quality and customer experience. A competitive pricing strategy, which involves strategically selecting price points based on competitor pricing and market conditions, is essential to truly succeed.

You buyers are cautious – heck they are PISSED! Think the constant shrinkflation, think about prices constantly going up without commensurate increases in value.

For some reasons everyone things they can just charge more for nothing. This isn’t going to work anymore.

Having said that, let’s take a look at these pricing strategies from a practical point of view.

When and How to Use These Pricing Strategies to Compete on Price: A Competitive Pricing Strategy

Here are the 6 pricing strategies outline in the Harvard article. Again, before you just choose one of these, think about your buyer and what they want from your product or service.

Competitor pricing plays a crucial role in implementing a competitive pricing strategy. By conducting market research and analysis, you can assess the prices of your products or services against competitor prices.

Don’t overstate your features or benefits. Aim to underpromise and overdeliver. Instead of just throwing features out there because they sound good, actually dig deep and look at ways that you can give your customers guaranteed results, faster results, less effort on their part.

Tiered Pricing: The Buffet of Choices

When to Use: Ideal for services with varying levels of features or products with different quality tiers. Think streaming services or software packages. When Not To: Avoid if it complicates the customer’s decision-making process or if your product doesn’t naturally lend itself to tiering.

Tiered pricing is like a buffet – offering something for everyone. It’s a strategy that shines in situations where customization and choice are key. Netflix does this brilliantly, with options ranging from basic to premium, catering to different appetites and wallets.

Incorporating competitive pricing strategies is crucial in this context. Constant monitoring and adjustment of prices based on factors like supply chain disruption, changes to customer demand, and the arrival of new disruptors in the market can help prevent market share losses and enable more strategic decisions in the long run.

Don’t get me started on streaming services. Netflix has created these tiers and given their customers the option of paying “less” (what they were paying a few years ago) only with commercials.

People are PISSED. @poojsvarietyhr Netflix ads tier is not great #youngroyalsnetflix #netflix #netflixmovies #netflixshows #wednesdaynetflix #sandmannetflix #GenshinImpact32 ♬ Psycho Killer – Talking Heads The NFL is guilty of this as well. They’ve had games on Amazon Prime and literally gated content so that even local teams can’t see their team play during the regular season unless they are Amazon Prime customers.

Not Good.

The idea behind tiered pricing is to bring customers who couldn’t afford your product or service into the fold. You can offer less, but don’t cannibalize your core offer and what your brand is known for.

Netflix has broken two important elements of their brand promise – account sharing (which was their core competitive advantage) and they’ve added a lower cost option that includes commercials.

They are trying to get new users, but they are also degrading the experience for their loyal customers.

BOGO: The Oldie but Goodie

Buy One, Get One Free – this classic strategy has made a comeback, and why not? It’s perfect for inventory clearance and catching the eye of the bargain hunter. But remember, the value of the primary product is crucial. Don’t let the deal overshadow the quality.

Understanding and reacting to competitors’ prices is essential. Monitoring and analyzing competitors’ pricing strategies can help you stay competitive and maintain customer loyalty.

When to Use: Great for inventory clearance, seasonal promotions, or attracting deal hunters.

When Not To: Steer clear if it devalues your primary product or if the deal seems too good to be true, which can raise suspicion.

Discounts and Anchors: Use with Caution

When to Use: Effective during limited-time sales events or when introducing new customers to your brand. When Not To: Risky if used too frequently, as it can set unrealistic pricing expectations and diminish perceived value.

Here’s a tricky one. Setting a higher base price and then slashing it can reel in customers, but it’s a double-edged sword. Use it wisely, ideally in scenarios like seasonal sales, where the discount feels like a special event, not a daily deception.

Understanding competitors pricing strategies is crucial. Setting prices based on competitors’ prices can attract more customers and increase market share. It emphasizes the importance of understanding consumer perception of value to effectively implement competitive pricing.

The 2023 Black Friday season is a terrific example of this strategy FAIL.

TikTok had a series of videos of consumers going to Target and sharing that the Black Friday price was no different (and sometimes higher) than they were previously. @red_pump17 Retailers and their fake Black Friday deals…. Continue the boycott.##fypシ゚viral##❤️🖤🤍💚##fyp ♬ original sound – 10 Toes Down Wit Palestine🇵🇸

Charm Pricing: Subtle Yet Effective But Only Sometimes

When to Use: Apply for small-scale retail items or price-sensitive products where a slight difference can influence decision-making. When Not To: Avoid if your brand positions itself as high-end or if rounding up would simplify pricing without impacting perception.

That 99-cent trick? It’s everywhere, and for a good reason. It nudges the customer’s decision-making subtly. It’s not about deceiving; it’s about making the price more palatable, more… charming.

As a fiscally responsible business owner, controlling costs and ensuring profitability is crucial. Pricing too low can have negative effects, so smart pricing strategies are essential to achieve a healthy profit.

The latest research, however, is saying that this isn’t a silver bullet. So while this is certainly a pricing strategy, it isn’t all it’s cracked up to be.

Subscriptions: The Gentle Long-Term Embrace

When to Use: Best for services requiring regular use or long-term engagement, like software or fitness memberships.

When Not To: Not ideal for one-time use products or if it locks customers into long-term commitments without sufficient value.

Subscriptions are the modern-day layaway plan. They make large payments feel like a gentle hug rather than a bear squeeze. Ideal for services where you want to hold onto your customers for the long haul.

One effective strategy to attract more consumers is to offer a lower price than your competitors. This competitive pricing tactic can help create more leads and increase sales.

But here’s the deal. There are so many people running a subscription model, that you’d better make sure that your offer is subscription worthy. Otherwise, you’re going to find yourself with a lot of turnover.

Bundling and Price Matching: Creating Irresistible Packages

Bundling is like the combo meal of the business world – offering a complete package that’s hard to resist. It’s about wrapping up related products or services with a neat bow and a single price tag. This approach not only boosts perceived value but also serves up a taste of your diverse offerings. Perfect for when you want to give customers a fuller experience, introducing them to products they might not have explored on their own. Ideal for businesses looking to provide a comprehensive solution while enhancing the overall customer journey.

Another effective strategy is offering products at lower prices to attract new customers. By reducing prices compared to competitors, businesses can increase market share, boost profits, and build brand loyalty.

When to Use: Effective when you have complementary products or services that together enhance overall value. When Not To: Not advisable if the bundled items don’t logically fit together or if one item significantly outshines the others, making the bundle seem unbalanced.

Underpromising and Overdelivering: The New Sexy in Business

Honest Value Over Competitor Pricing Gimmicks

This is where we get real. It’s time to strip away the fancy packaging and focus on delivering something that genuinely wows your customers. It’s about being the tortoise in a race filled with hares – slow, steady, and reliable wins the race.

One effective strategy is to set a premium price, positioning your product above the competition to establish it as a higher quality option. This approach allows you to compete on quality rather than price.

Building a Fortress of Trust

Transparency is your new best friend. Be open about your costs, your process, and why your product is priced the way it is. Build trust brick by brick – it’s the foundation of long-term customer relationships.

One effective strategy is to set your prices equivalent to the prevailing market price, which is the price set by your rivals. This approach allows you to remain competitive while differentiating yourself through unique marketing strategies.

Success Reimagined: Satisfaction Over Sales

Here’s a radical thought: let’s measure success by customer satisfaction, not just sales figures. It’s about creating a tribe of loyal followers who don’t just buy your product but believe in it.

One effective strategy to achieve this is price matching, where a company agrees to honor the same price as a competitor if a customer finds a similar product elsewhere at a cheaper price point.

Practical Tips for Navigating the New Landscape with Strategic Price Points

In a market where trying to compete on price can often feel like a race to the bottom, it’s crucial to shift gears and focus on what truly sets you apart. One effective strategy is price skimming, which involves initially charging a high price for a new product and then gradually lowering it over time. This approach is particularly beneficial for innovative brands with in-demand products, as it allows them to maximize revenue from early adopters before targeting more cost-conscious customers as competition increases. Let’s dive into some practical tips that will not only help you stand out but also ensure you’re delivering real value to your customers.

Listening to the Voice of the Customer

Involve your customers in your product development. Their feedback is the compass that guides your journey towards a product that not only meets but exceeds expectations.

However, be cautious of engaging in a price war, as continuously lowering prices to compete with larger competitors like SHEIN can devalue your products. Instead, align your pricing strategy with your business goals and market position.

Marketing with a Heart

Develop marketing strategies that reflect the real benefits of your product. No fluff, no puff – just pure, unadulterated value.

Setting strategic price points is crucial to ensure your product remains competitive in the market. By analyzing the pricing of similar products sold by competitors, you can select price points that take advantage of the product market relative to the competition.

Customer Service: The Unsung Hero

Never underestimate the power of stellar customer service. It’s the safety net that catches and addresses any customer concerns, reinforcing your brand’s value promise.

When setting prices, it’s crucial not to base them solely on the competition. Doing so might give your target market the impression that your business is inexperienced or of lower quality.

The Dawn of a New Era in Business

We’re standing at the brink of a new era in business – one that favors honesty, integrity, and genuine value over flashy marketing tactics. You don’t have to compete on price.

A key component of this shift is the adoption of a competitive pricing strategy, where businesses strategically select price points for goods or services based on competitor pricing.

It’s about building a brand that’s loved not just for what it sells, but for the honesty and reliability it represents.

Welcome to the great reboot of business. It’s not just a change; it’s a revolution.

Table Of Contents:

• What is Price Skimming?
  • Definition of skimming price or price skimming
  • How price skimming works
  • Advantages of price skimming
• How to Implement a Price Skimming Strategy
  • Steps to implement price skimming
  • Factors to consider when implementing price skimming
  • Challenges of implementing price skimming
• Examples of Price Skimming
  • Technology industry
  • Luxury goods industry
  • Automotive industry
• When to Use Price Skimming
  • Unique or innovative products
  • High demand and low competition
  • Strong brand loyalty
• Pros and Cons of Price Skimming
  • Advantages of price skimming
  • Disadvantages of price skimming
• Conclusion

What is Skimming Price or Price Skimming?

Skimming price, better known as price skimming is a pricing strategy that’s been around for ages. It’s when a company charges the highest initial price that customers will pay, then lowers it over time. Why do this? To “skim” the cream off the top – the customers most eager to buy at the highest price point. I’ve seen it work wonders for businesses launching innovative new products with little competition.

We’ve all seen price skimming at work, most often with high-tech products like computers, mobile phones, and cars.  In other words, you need to know that you have at least 20% of your customer base that are “early adopters” — who are willing to pay more to have access to your product or service first. 

Definition of price skimming (or skimming price)

Here’s the official definition: price skimming involves setting a high price for a new product or service, then gradually reducing the price to attract more price-sensitive customers. The goal is to maximize profit by segmenting the market based on willingness to pay. It’s a pricing strategy often used by first movers with a unique offering. Charge the highest price the early adopters and innovators will accept, then drop the price to reach the more budget-conscious buyers.

How price skimming works

The skimming pricing process usually looks like this:

1. Launch product at a high price to tap into high-end demand
2. Allocate more budget to promotion to build buzz and desire
3. Keep prices high while early adopter demand is strong
4. Gradually lower prices as more competitors enter the market
5. Attract the more price-conscious mass market with reduced prices

The initial high prices help recoup R&D costs and maximize revenue from the most eager buyers. Then as the product pricing strategy shifts, a company can maintain market share against rising competition.

Advantages of price skimming

I’m a big fan of price skimming for the right product. Some key benefits I’ve seen:

• Higher profit margins to recover development costs quickly
• Creates an exclusive, high-end image for the product
• Allows a company to test what the market will bear
• Captures maximum revenue from the least price-sensitive buyers
• Helps forecast demand at lower price points for later on

Of course, it only works for the right product – something innovative enough that early adopters will pay a premium. And you have to be ready to pivot your skimming strategy as the market evolves. But when done right, skimming pricing is a powerful way to maximize profit and build a premium brand. It’s all about understanding your market and having the agility to adapt your approach.

How to Implement a Price Skimming Strategy

So you’re sold on price skimming – now what? Implementing this pricing strategy takes some finesse. But with the right planning and execution, you can make it work wonders for your product launch.

Steps to implement price skimming

Based on my experience, here’s a roadmap to rolling out a successful price skimming strategy:

1. Develop a standout product with clear benefits over competitors
2. Research your target market to identify early adopter segments
3. Price high based on the value to those early adopters
4. Promote heavily, emphasizing exclusivity and innovation
5. Analyze sales data and customer feedback to spot demand shifts
6. Incrementally lower prices to attract the next tier of buyers
7. Broaden your marketing as you expand your customer base

The key is to stay nimble. Monitor the market closely and be ready to adapt your skimming model as conditions change. It’s a delicate dance, but a lucrative one when done right.

Factors to consider when implementing price skimming

Before you dive in, carefully weigh these factors to ensure skimming works for your business:

• How unique is your product? Skimming only works if you offer something special.
• How strong is your brand? An established reputation makes premium pricing easier.
• How much competition do you face? Skimming is harder in a crowded market.
• What are your production costs and margins? Ensure your pricing covers your expenses.
• How large is your early adopter segment? You need sufficient demand at high prices.

Balancing all these elements is an art and a science. But if the stars align, a skimming pricing method can be your rocket fuel.

Challenges of implementing price skimming

I won’t sugarcoat it – price skimming comes with some risks. The biggest challenges I’ve navigated:

• Backlash from customers who feel “ripped off” by high prices
• Damage to your brand image if seen as greedy or exploitative
• Attracting competitors who undercut your prices
• Difficulty lowering prices later without hurting your premium image
• Potential to misjudge initial demand and overprice yourself out of the market

Overcoming these pitfalls requires a deft touch. Emphasize your product’s unique value to justify your prices. Build an aspirational brand. And time your price drops carefully to maintain your margins and market share. It’s not easy. But for the right product and market, a well-executed rapid skimming strategy can be a game-changer.

Examples of Price Skimming

Need some inspiration? Let’s take a look at how price skimming has been used successfully across different industries. Some classic case studies:

Technology industry

The tech world is full of price skimming examples. Think about every time Apple launches a cutting-edge new iPhone. They start with premium pricing to capitalize on the hype and recoup R&D costs. Then prices drop over time as the technology becomes more mainstream. It’s a tried-and-true strategy for Apple. Loyal fans line up to pay top dollar for the latest and greatest. By the time competitors catch up, Apple has already captured huge profits and cemented their innovative image.

Luxury goods industry

Luxury brands are masters of price skimming. Take a high-end handbag designer launching a new collection. They’ll often release it at sky-high prices to create an air of exclusivity. Only the wealthiest fashionistas can afford it, which only makes it more desirable. Over time, the designer may extend the line to more affordable diffusion brands. But the initial high prices set the tone for the brand’s luxury status.

Automotive industry

The car world also has some great examples of skimming pricing strategy. Electric vehicles are a prime case. When new EV models first hit the market, they often have lofty price tags to offset development costs and target early adopters. Think of the Tesla Roadster starting at over $100K. As the technology matured, later models like the Model 3 became more affordable for the mass market. But those initial high prices established Tesla as an innovative leader. From iphone price skimming to Chanel bags to the newest EVs, these examples show the power of starting high and working your way down market. The key is to offer something that early adopters will clamor for and be willing to pay a premium to get. Get that right, and price skimming can take you to the top.

When to Use Price Skimming

Price skimming is a strategic approach to pricing that works best in specific situations. It’s not a one-size-fits-all solution, but when used correctly, it can be a powerful tool to maximize profits and establish a strong market position.

Unique or innovative products

If your company is launching a truly groundbreaking product that stands out from the competition, price skimming can be a smart move. When you have something that no one else offers, you have more flexibility to set higher initial prices. Think about the first iPhone back in 2007. Apple knew they had a revolutionary product on their hands, so they started with a high price point of $499. Early adopters were willing to pay a premium for this innovative device, allowing Apple to “skim” the top of the market before gradually lowering prices over time.

High demand and low competition

Price skimming also works well when there’s pent-up demand for your product and limited competition. If consumers are eager to get their hands on what you’re selling and there aren’t many alternatives available, you have a window of opportunity to charge higher prices. I saw this play out with the PlayStation 5 launch. Despite a steep $499 price tag, demand far exceeded supply. Sony could maintain that high initial price because gamers were clamoring for the console and there wasn’t a comparable alternative on the market yet.

Strong brand loyalty

Companies with fiercely loyal customer bases can often get away with price skimming. When you have a tribe of devoted fans, they’re more likely to pay top dollar for your latest and greatest offering. Apple is a master at this. They’ve cultivated such strong brand loyalty that their customers are willing to pay a premium for each new iPhone model, even when competitors offer similar features at lower price points. That brand equity gives Apple the ability to price skim with each release.

Pros and Cons of Price Skimming

As with any pricing strategy, there are both advantages and disadvantages to price skimming. It’s important to weigh the potential benefits against the risks before deciding if it’s the right approach for your business.

Advantages of price skimming

One of the biggest advantages of price skimming is the ability to maximize profits, especially in the early stages of a product launch. By charging the highest price that early adopters are willing to pay, you can capture more revenue from each sale.

Price skimming can also help you recoup research and development costs more quickly. If you’ve invested heavily in creating an innovative new product, starting with high prices can help you recover those upfront expenses and reach profitability faster.

Skimming also lets you tap into the psychology of prestige pricing. For some consumers, a high price tag is a signal of quality and exclusivity. Setting premium prices can help position your product as a status symbol and build brand equity.

Disadvantages of price skimming

On the flip side, price skimming does have some potential drawbacks. The biggest risk is attracting competitors. If your high prices are generating outsize profits, it’s like blood in the water for hungry rivals. They may rush to undercut you with cheaper alternatives.

Price skimming can also make it harder to lower prices over time without diminishing your brand. If you start too high, consumers may view your product as overpriced when you eventually drop the price. It takes careful marketing to adjust prices while still maintaining a premium image.

There’s also the chance that you misread the market and set prices too high for even early adopters. If your initial prices are out of step with demand, you may struggle to make sales and be forced to slash prices more quickly than planned.

Ultimately, the pros and cons of price skimming depend on your specific situation. For the right company with the right product at the right time, it can be a savvy way to maximize revenue. But it’s not without risks, so it’s crucial to thoroughly understand your market, your customers, and your own capabilities before taking the leap.

Conclusion

So there you have it, the lowdown on skimming pricing. It’s a strategy that can work wonders for the right product and market. By starting with a high price and gradually lowering it, you can maximize your profits and create a sense of exclusivity around your offering.

While skimming pricing can be effective, it’s important to remember that it’s not always the best approach. It tends to work well for groundbreaking products with a clear edge over the competition, and when there are plenty of early adopters ready to invest in something extraordinary.

If you think skimming pricing might be the right fit for your next launch, do your research, know your audience, and don’t be afraid to start high. With the right approach, you could be laughing all the way to the bank.