Pivot Pricing for Profit

29 January 2016

Business can be tough at the best of times, but the last few years has seen an influx of competitors into Australia’s business sector. Consolidation in the vertical supply chain, lower barriers to entry through technological advances and a post-GFC entrepreneur boom as seen competition flourish, disrupting even the most stable industries.

Competitive saturation is now the norm for many corporates. Dominant market positions are being challenged by the explosion of new start ups featuring leaner, cutting edge and arguably superior business approaches.

The freedom that budding entrepreneurs experience can be liberating and with a half-decent business model you can make as much income working for yourself than you can working for ‘the man’. The problem for established brands is that the internet gives consumers significantly more choice at a convenient flick of a finger. They can choose from a multitude of small operators who might offer better value than the entrenched major players.

A simple Google search allows your business to be compared to competitors like never before. Your only one back button click away from being second. Sometimes as a business you need to pivot and be inventive as to how you present your offering to the market.

Getting the most profit from your customers

Perhaps the best way to grow your business is being inventive with your pricing strategy. There is a way you can advertise a lower price point without compromising profitability through subscription models. Used increasingly by even large corporates such as Adobe and Microsoft, they can have significant advantages.

  • Recurring revenue for the business: Even without soliciting new clients you can still gain revenue over a longer period of time.
  • Lower cost of services: Without the need to foot huge upfront purchase or establishment costs for a service (ie. a software package), payment for a service can be smoothed over for a longer period of time or indefinitely, depending on the product offering.

This new sales model emerged largely in the software and tech industries where licensing for products and services has shifted from a once-off package purchase to a monthly-fee-for-access scheme. Popular apps and programs such as Xero, MYOB, Symantec Antivirus and even the prehistoric Microsoft Office Suite are all now based on a subscription model representing significant benefits for both the provider and consumers.

Even legal services are offered on a retainer for about $15 USD per month through the US Legal Website LegalZoom or, more recently, LawPath in Australia. Australia’s legal industry be warned. Your time of billable hours is drawing to an end.

For your next start-up idea or business venture, be sure to consider different ways of presenting the cost of your product/service.

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