Pricing Web Services

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FACTS, OPPORTUNITIES & TABLE OF CONTENTS

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This Section contains:
The Facts
The Opportunities
Table of Contents

The Facts

• Web service is one of the fastest growing industries in America.
• Many web site developers don't set prices properly.
• In reality, many have NO pricing strategy.
• They often don't charge for all that they could (or should).
• They tend to leave money on the negotiating table.
• Profit increases as business wisdom grows (getting street smart).

The Opportunity

• Helps you set profitable prices that work.
• Counter persistent cutthroat competitors.
• Determine what you're service is worth and what you should (could) charge.
• Get customers to pay the prices that you deserve.
• Substantially increase your profit on every sale!
• Become a winner with smart, professional pricing!
• Make GOOD money no matter where your “office” is located.
• Tips, tricks, techniques and rules of thumb for setting price.
• Your passport to profitable web service pricing.

Table of Contents

Introduction: Incredible Opportunities; How to Use This Book

Chapter 1 - The Concept of Price: What is a Price?; What’s Included in a Price?; Factors Affecting Price; Market Size; Costs; Demand; Economy; Competition; Perceived Value; Value Pricing; Looks and Location; Law and Government; Can Web Service be Profitable?

Chapter 2 - Market-Based Pricing: Psychology of the Buyer; Customer Satisfaction; Market Analysis; Estimating Demand for Your Services; Elasticity of Demand; Factors That Affect Demand Elasticity; How to Evaluate Demand; Responding to Elasticity Situations; Setting Price Based on Your Market

Chapter 3 - Competition-Based Pricing: Analyzing the Competition; Collecting Competitor Information; Estimate Number and Location; Visit Their Web Sites; Who Are Your Competitors?; Look at Their Printed Display Ads; Read Their Press Releases; What Organizations Do They Join?; What Else Do They Do For Publicity?; Which Competitors are Closest to You?; What About Their Financial Condition?; Talk to Their Customers; How Much are Competitors Charging?; With Results in Hand

Chapter 4 - Cost-Based Pricing: Cost of Services Sold; Determining Costs; Fixed Costs; Variable Costs; Direct Costs; Indirect Costs & Overhead; The Overhead Factor; Burden Rate; Make a Cost & Overhead Analyzer; How to Use a Cost & Overhead Spreadsheet; General & Administrative Costs; Cost of Services Sold; Calculating Cost of Sales & Support; How Costs Vary During a Project; The High Cost of Meeting; The Cost of Unused Capacity; Cost-Based Pricing Process

Chapter 5 - Productivity and Price: Productivity Defined; Factors That Affect Productivity; Calculating Productivity; Measuring Productivity by $/FTE; How to Go From 30% to 60% Productivity

Chapter 6 - Getting a Baseline Price: Budgeting Costs to the Task Level; Calculating Budgeted Hourly Cost; Putting It All Together; Example - BHC Costs for Home Page; Example - BHC Costs for 6-Page Site; Now Generate a Baseline Price

Chapter 7 - The Components of Profit: What Is Profit?; General Accounting Principles; Measuring Profit; Profit Objectives; Gross Margin in Web Services; Potential for Error in Calculating Margin; Break-Even Analysis; Break-Even Using Sales Volume; Break-Even Using Sales Quantity; Margin Analysis; Finding Optimum Order Size; Improving Profit With Margin Analysis; Return on Investment; Calculating ROI on Marketing & Sales; Return on Assets (ROA)

Chapter 8 - Pricing Strategies: Developing a Strategy; Selecting Which Services to Offer; Defining Your Business Objective; Pricing Strategies to Consider; Cost-Oriented Pricing; Markup Pricing; Cost-Plus Pricing; Cost-Volume Pricing; Targeted Profit Pricing; Targeted Return on Sales Pricing; Targeted Return on Investment Pricing; Shop Oriented Pricing; Floor Price Plus Some; Percent Capacity Plus Margin; Net Revenue, Inventory Sell Off; Single Price, Any Customer; Desired Pay Plus; Only Pricing With Commas Accepted; Pricing by Expertise; Competitor-Oriented Pricing; Match the Competition Pricing; One-Half” Pricing; “ 3X Better, 3X Below” Pricing; Straddle Pricing

Competing Head On With Lowest Price

Market-Oriented Pricing

New Service Pricing

Leadership Pricing

Pricing in the Zone

Loss-Leader Pricing

Customer-Set Pricing

Accepted-As-Customary Pricing

Subjective Pricing

Tiered Pricing

Penny Pricing

Composite Pricing

Other Pricing Strategies

Analyzing Your Customers by Profit

Measuring Market Share

Donating Services

Don’t Give Away the Store

Adding Products & Services

Pricing After a System Update

Pricing Assumptions by Competitors

Countering Cutthroat Prices

The “ 10 Plus 10” Strategy

Value Pricing

Pricing in a Competitive Market

When a Major Competitor Moves In

Chapter 9 - Pricing Tactics: Tactical Pricing Actions; Overcoming Pricing Problems; Price It Right the First Time; Pricing is a Policy; Charging by the Page, Hour, etc.; Incorporating Other Charges; Reducing Your Price; Coupons; Send a Check; Rebates; Discounts & Allowances; Giving Volume Discounts; Discounting & the Law; Sales Needed to Make Price Cut Work; The Capacity Trap; When Price Cutting Works; How to Handle a Price Cut; When They Ask for a Price Break; Raising Prices; How to Know It’s Time; How to Handle Price Increases; Transitioning From Free to Paid Service; How Much Can You Raise Your Price?; Subtle Ways to Raise Prices; Handling Price Increase Objections; Hiding a Price Increase; When the Price Seems Too High; Overcoming Problems in Web Services Today; When to Turn Down a Job; Spotting Clients From Hell; Handling Dissatisfied Clients; Choosing the Right Price; How to Break Out Top Profits

Chapter 10 - Estimating, Bidding & Negotiating: The Basis for Good Estimating; Applied Estimating; Specifying a Job; Create a Form for Estimating; An Estimate is Not a Bid; Getting Bid Opportunities; Responding to a Request for Bid; Symptoms of a Poor Bid Response; Bidding Against Alligators & Cutthroats; The Case for Market-Based Bidding; Submitting a Formal Quote; Beating the Competition; Negotiating Techniques; Put Your Agreement in Writing; Omissions in Many “Standard” Contracts; Follow Up on Your Estimates; When Estimating Your Next Job; Tracking Bids and Buyer Decisions; Analyzing Profit in Competitor Bids; How Long From Proposal to Contract; Bidding Tips; Quoting a Price Over the Telephone; Dealing With Price Fishing; Quoting a Completion Date & Time

Chapter 11 - Do It By the Numbers: Analyzing Financial Numbers; The Critical Number; Cash on Hand; Income; Expenses; Cost of Services Sold; Expense as Percent of Gross Income; Accounts Receivable; Inquiries Received; Purchase Orders (Sales); Conversion Ratio; Number of Customers; Hours of Services Sold; Average Sale Amount; Gross Profit; Net Profit; Project Turnaround Time; Projects Pending (Backlog); Revenue Per Employee ($/FTE); Monitoring Schedule; Cash Flow; How Much Can You Actually Earn?; Final Food for Thought

Appendix: Geographical Distribution of Web Service Shops; Web Site Design Rates by State; Web Service Prices; Most Popular Web Services; Most Popular Software; Where the Money is Being Made

Index

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