You shouldn't be satisfied with simply making a profit. There are several ways to maximise your profit margins by manipulating the way you price your products or services. Suppose, for example, a printed product such as a calendar is planned. Sales of 10,000 are forecast at a unit price of £1 on a costs-plus-profit basis. If the print run is increased by another 10,000 copies, the direct costs of these extra run-on copies will be far cheaper. So if you can unload the additional 10,000 elsewhere by charging, say, only 25p each you are showing an extra profit. Marginal pricing – the risks But be warned that marginal pricing is playing with fire. If your normal customers discover that others are getting your product at a quarter the price you will have killed your market in one stroke. Make sure the dumped products are sold well away from your usual market – ideally in another country entirely – and don’t make a habit of it. Discriminatory pricing Another approach – a safer one than marginal pricing – is known as discriminatory pricing. With this, prices are modified according to differences in customers, locations and products. There are five different forms of discriminatory pricing:- Customer segment pricing:
Different customer groups are charged different prices for the same product (eg museums charge a lower admission rate for students). Product-form pricing:
Different versions of the product are priced differently, but not proportionately to their respective costs (eg bottled mineral water – £1 for a litre bottle, 60p for a 25cl bottle and £1.99 for a 100ml moisturiser spray). Image pricing:
The product can be sold at two different levels, based on image differences Location pricing:
The same product is priced differently at different locations, even though the cost of the offering is the same (eg seats are more expensive in Odeon cinemas in London than in the rest of the country). Time pricing:
Prices are varied by season, time or demand (eg peak and off-peak phone calls). Another version of this is yield pricing in the travel industry where prices are lowered at the last minute to fill planes, ships and hotels. There are also several other methods of increasing profit: Psychology Psychology in price points is often applied in consumer goods – 99p instead of £1; £9.95p instead of £10, etc. Martin Smith, director of the Millennium agency, says the original objective of this type of pricing was not to delude customers, but to foce sales assistants to go to the cash drawer to give change, rather than pocketing proceeds. Product Uniqueness Mike Pearce, chairman of London marketing agency TSM, says: “Define the sector you are competing in, identify the key competitors, analyse their pricing and relate that to your own cost structure. “Don’t go into the market with a me-too product at a me-too price. If your product is unique or different, you have a degree of pricing elasticity. The uniqueness may not be in the product itself but a function of your customer care and after-sales service.” Marketing communications specialist Richard McCann recently completed a book which examines what he calls ‘time famine’. He suggests that it is just as critical to apply the ‘value for time’ test as that of ‘value for money’ when pricing your products and services. McCann notes that: “Some suppliers, realising that customers can become irritated if forced to wait too long, have developed a system of ‘queue-busting’ whereby experienced staff are held in reserve ready to attack the delays.”

This illustrates how the price of products is not seen by the purchaser simply in terms of what is the cheapest. Price, McCann says, “is one element in the total bundle of satisfactions.”