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Monday, March 05, 2007

Pricing Strategy: Some Examples of Fee Structures You Can Use

Pricing strategy is a tricky business. You can’t use a pricing strategy that gives you too low a rate, and you can’t use one that is too high or you will lose money and business. How do you set a pricing strategy that is right for your business?

Three Pricing Strategies

Computer consulting professionals use three pricing strategy methods: price-fixed pricing strategy; per PC or per server pricing strategy; hourly rate.

Fixed Price Pricing Strategy

When presenting a fixed price pricing strategy, you need to be prepared to outline the scope of the project. You will also need to have clear limits for your work so you don’t risk under-billing.

Per PC, Per Server Pricing Strategy

The per PC, per server pricing strategy is similar to the fixed price method, but you have to know what unit costs are. Hat will change as you begin to add or get rid of PCs, and how will these changes affect the total project? This type of pricing strategy gives you some leeway if the project grows from the original estimate and can be combined with the fixed price pricing strategy.

Hourly Rate Pricing Strategy

This type of pricing strategy can also be called “time and materials” and is the strategy used most commonly in the IT field. This pricing strategy allows you to set an hourly rate and then add cost based on the materials you use. This pricing strategy gives you superior protection when the project expands beyond what you originally predicted.

Choosing from Three Main Categories of Pricing Strategy

Before you choose the best pricing strategy for your company, think carefully about the benefits and pitfalls of each one. You need to price services based on what will be most profitable and allow you business to survive and thrive in the long run.

Blogged By: Joshua Feinberg