• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Advertise
  • Submissions
  • About Us
  • Contact Us
  • Mar 1, 2021
  • Startup
    • Creating a Plan
    • Funding a Startup
    • Franchise Center
    • Getting Your Office Ready
    • Making Your Business Official
    • Marketing Your New Business
    • Personal Readiness
  • Run & Grow
    • Customer Service
    • Human Resources
    • Innovation
    • Legal
    • Operations
    • Risk Management
  • Leadership
    • Best Practices
    • Communication
    • Green Initiatives
    • Open Culture
    • Strategic Planning
    • People Skills
  • Sales & Marketing
    • Advertising and Lead Generation
    • Marketing Innovations
    • Marketing Plans
    • Online Marketing
    • Relationships
    • Sales Activities
  • Finance
    • Budgeting and Personal Finance
    • Payments and Collections
    • Tax and Accounting
    • Pricing Strategy
    • Working with Investors
    • Working with Lenders
  • Tech
    • eCommerce
    • Hardware
    • Software
    • Security
    • Tech Reviews
    • Telecom
  • Shop

SmallBizClub

Helping You Succeed

efile4biz banner
Home / Finance / Pricing Strategy / How Do I Create High Margins?
How Do I Create High Margins?

How Do I Create High Margins?

1428 Views

Aug 6, 2013 By Scott Miller

One of the most difficult elements of marketing for most people is the art and science of pricing. There’s a lot of science to it—but it’s also an art. How do you price your goods and your services? Where do you start?

 
The Basic Formula: Creating Value
 
A lot of people know the basic formula: you take your cost of goods, or what it costs to deliver your service; your cost of sales and marketing, what it costs you to distribute your product or service, get it out there, and get awareness by putting advertising or marketing campaigns behind them; and then finally the margin you want to charge—how much profit you want to make on each sale. You can’t have a business without a profit! A high margin will really give you value.
 
But to get that high margin, you have to deliver value to your customers. And the way value is really created in the marketplace is through relevant differentiation:
 
  • Relevance is about having a product or service that really fits someone’s needs and wants. It truly services them, delivering something that benefits them.
  • Differentiation means you’re unique in your marketplace.
 
Relevant differentiation creates value; value creates margin. That’s the key to good pricing.
 
6 Pricing Possibilities
 
In your marketplace, there are six possibilities for making relevant and different pricing.
 
  1. Deliver the same thing for the same price. This is a no-go. You can’t just be part of the crowd—but unfortunately, so many things really are marketed just that way! There’s no reason to move from one competitor to another; same for same is no way to sell.
  2. Deliver the same thing for less. That’s a good proposition. But you have to know that you can deliver lower costs—producing with lower costs, distributing and marketing with lower costs. This strategy also tells consumers you’re going to make some sacrifices to deliver.
  3. Deliver the same thing for more. Well this one obviously won’t work! It’s a quick way to go out of business, charging too much and pricing yourself out of the market.
  4. Deliver more for less. This is similar to delivering the same for less. It’s a good proposition, but you have to be able to deliver, and be confident that you have a secret way to hold costs down so that you can continue to deliver on that value proposition.
  5. Deliver more for the same price. Now we’re getting to my favorites. It’s a great way to differentiate when you do more than your competition, and when you do it for the same price, it’s a better value proposition for your customer.
  6. Deliver more for more. This is my favorite. Give people more service, higher quality, a better experience—and charge more for it. Even though it costs more, people will be willing to pay more because it’s unique in the marketplace, and that’s the key to making high margins.
 

Filed Under: Pricing Strategy Tagged With: Differentiation, Margin, Pricing, Pricing Strategy, Profit, Relevant Benefits, Scott Miller

Scott Miller

Scott Miller

After graduating from Washington & Lee University in 1967, Scott Miller began a career in advertising and political consulting. As Creative Director of McCann-Erickson in New York, he worked for such clients as Coca-Cola, Miller Brewing and Exxon, and won every major award for creative excellence in the advertising industry, including Clio Awards and a Lion d'Or from the Cannes Film Festival. In 1979 he founded Sawyer/Miller Group with David Sawyer. In 1988, Scott co-founded Core Strategy Group. At Core, he has worked on developing communications, marketing and branding strategies for a number of Fortune 100 clients. In addition, he provides commentary on political and corporate communications on the major television networks, and often lectures on communications, branding and insurgent strategies.

Related Posts

  • does-your-customer-understand-your-differentiation-Are You Really Differentiated?
  • 5 Steps to Help You Decide on the Perfect Property Investment
  • How Your eLearning Business Can Rise Above the Competition

Primary Sidebar

bottom line ad

Random

UK Food Delivery: Overly Saturated or Growth Potential?

Mar 1, 2021 By Craig Harbour

Increase Conversion Rate with Great Landing Pages

Mar 1, 2021 By Gemma Moss

What Nursing Homes Will Look Like Post-Pandemic

Mar 1, 2021 By Brian Wallace

Can You Take Your Business Online with Shared Hosting?

Mar 1, 2021 By Louise Harris

5 Tips To Enhance Personal Injury Compensation

Feb 26, 2021 By Peter MacCallister

Footer

About Us

Small Biz Club is the premier destination for small business owners and entrepreneurs. To succeed in business, you have to constantly learn about new things, evaluate what you’re doing, and look for ways to improve—that’s what we’re here to help you do.

  • Facebook
  • LinkedIn
  • RSS
  • Twitter

Copyright © 2021 by Tarkenton Institute, Inc. All Rights Reserved | Terms | Privacy