Flexible Pricing Part II


How to Make a Profit Through a Flexible Pricing Model

Today we’re continuing our discussion on maximizing your profits by adopting a more flexible pricing model. Another way to see this type of flexible pricing in action is to walk around the streets of any large city in America. You’ll find many street vendors marketing wares like pashmina wraps and winter hats. Obviously, these are products that have a higher demand as the weather outside becomes colder.

As a result, the price of these products is dictated by the weather: in warmer months, you’ll find these products discounted. As the weather cools the price will steadily rise. If it’s snowing, the price will rise again.

This is a pricing measure that is based on consumer demand for this particular product: as the need for cold weather accessories increases so does the value of these products thus raising the price. Developing a pricing model that changes the price of your product alongside consumer demand requires more than just a cost analysis. It requires actually getting inside the head of your customer and looking at your product the same way that they do. To do this, you can ask yourself some key questions:

How to Apply a Flexible Pricing Model to Business

You always have to think about budgets and pricing for your budgets. As we have discussed, the first step is determining what minimum price to set to cover your costs, soft and otherwise, and how customers determine the value of your products. If you are running at a loss, that means your business will go under the minute you run out of cash.


We will always recommend raising prices over lowering them. Most entrepreneurs would rather not take this route, because they worry about losing customers to competitors that keep their prices at a certain level. As long as you do the research, try to make little changes rather than big ones.

Consider these factors as well when you want to implement flexible pricing. They can help you set an appropriate strategy for your business, and during the long-term.


1. What sets your product apart from the competition?

Yes, your product might be similar to another product on the market, but it’s unlikely that they’re exactly the same. Little details and features can give you a competitive advantage. These can include particular size and shape, energy sources, and the ability to use with ease. If you’re doing value-based pricing, then you can adjust prices for these features.

Recognizing your product’s differences and marketing the product as being superior because of these differences can make your product more valuable to the consumer. Once the product is deemed as greater value for consumers, they are more willing to pay a higher price for that product. Optimizing your offerings is key, as well as determining what people want.

2. What is your current pricing model compared to alternatives on the market?

First, you need to have a pricing model. Whether it is competitor-based or value-based, the model provides guidelines by which you can start to set prices. If competitor-based, you can eyeball other company’s prices on similar products and adjust accordingly.

Conducting research on your competitors is a key prerogative for small businesses. Understanding the current market allows you to adjust your products for demand, as well as prices. You can use alternative product pricing as a starting point for getting to the right price for your product.

3. How much are your product’s differences worth to your consumer?

In some situations, simply the brand name of a product is worth spending more for that product. People buy an item for the status symbol, such as with luxury cars and colognes, or the joy that they derive from sharing the name. In others, it’s more about how green a product is, what the current need for the product is or what their emotional tie to the product is.

Consider how plastic straw alternatives are growing. The plastic straw debate is emotionally fraught because it started with videos of turtles having them stuck through their snouts and impeding breathing. Yet this is a viable market because people are creating disposable and reusable alternatives. People currently are evaluating these alternatives to honestly assess if they have value.

Again, doing research and surveying your customers is key. You can either use current or past information to figure that out.

In some cases, a seasoned professional can use years of experience to help determine a product price. They can rely on historic data to analyze certain trends. In others, consumer research within the marketplace is necessary to really determine what your customers are willing to pay for your product.

Key Takeaways

One thing to always keep in mind with your pricing strategy, especially in today’s economy, is that it’s never going to be a cut and dry situation. As variables within your marketplace change, your product price will need to change right along with them. This requires regular evaluation of changes to your competitor’s products and the value of your product to consumers, two important factors in your long-term pricing strategy. Fixed pricing will sink you.

Maintaining an optimal product price is a foundational key to maximizing your profit margins. You can do this by being consistent about responding to changes in your marketplace, staying in tune with what is important to your customers, and based on these factors, keeping your pricing structure in line with what the market will bear.

Improve Your Flexible Pricing Strategy With DeepSky

DeepSky wants to ensure that all of our clients succeed in expanding their small businesses. That includes refining flexible pricing and other services that other firms may overcharge. We want to ensure that you play to your strengths and leverage the competitive advantages within your products or services.

Contact us today to get started on pricing your products or services. DeepSky is ready to help you reach the next level and to earn a higher profit on your business.