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Value-Added Pricing

by Cathie Izor

If your competition offers lower prices than yours and you just can't afford to lower your prices, you might want to try adding value to your products instead. Value-added pricing differentiates your products by adding features or services that your competitors don't have and that customers will pay more for.

Also, you don't just increase your sales with this strategy. Your aim is to make customers loyal because you're offering services they can't find in other places. It's usually more profitable to retain loyal customers than spend marketing dollars and effort to find new ones.

If you just compete on price alone, then you encourage customers to focus on that one element rather than the full package they get from your business. Cut-throat pricing makes competing products look similar and discourages customers from seeing how products actually differ.

Examples of value-added pricing are:

  • Adding services or features that are no- or low-cost. For example, a house painter could add gutter cleaning to his services at no extra charge.
  • Donating a portion of sales to a local charity that is highly regarded by the customer base.
  • Excellent service that is consistent, not just an advertising slogan.
  • Rewards clubs for frequent buyers.
  • Quality and money-back guarantees.
  • Eco-friendly features, if the customer base values this.

But, how can YOU use value-added pricing? How can you add value that customers will gladly pay for?

A good way to start is to talk to customers and potential customers and ask them for ways that your products or services could be better. Ask what would make them feel they are getting more from what you have to offer. Ask them for ideas that your competitors don't offer.

You can also prepare a list of ways you could add value and then ask customers or potential customers to rank which ones would be most attractive to them. Also, ask how much more they would pay to get these features.

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