[et_pb_section fb_built=”1″ _builder_version=”4.16″ da_disable_devices=”off|off|off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.23″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_padding=”||0px||false|false” locked=”off” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” pac_dcm_carousel_specific_module_num=”0″ border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” pac_dcm_carousel_specific_module_num=”0″ global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Intro” _builder_version=”4.27.5″ header_2_font_size=”32px” custom_margin=”||0px|||” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n
Pricing models are how customers engage with your prices. Think of them as a first impression: it can make or break a purchase. It is why having the right pricing model is important, as it packages what you sell, who you are as a business, and the value you provide, all in a price tag.<\/p>\n
Let\u2019s look into pricing models and how you can incorporate them into your business.<\/p>\n
[\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2026\/01\/Pricing-Model-List-2.png” alt=”pricing models include cost-plus, value-based, competitive, tiered, dynamic, and penetrative” title_text=”Pricing Model List 2″ align=”center” _builder_version=”4.27.5″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.27.5″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n
There are a bunch of different pricing models to choose from, and more often than not, you don\u2019t need to settle on just one \u2014 you can use multiple models to sell your products.<\/p>\n
Cost-plus pricing is a simple way to price your services while remaining flexible in the face of changing costs. You will find trades, retail, and manufacturing using this model to deliver their services, as these industries are heavily dependent on wholesale materials.<\/p>\n
To implement, calculate your production costs, then add your desired margin. To determine your production costs, first identify your cost of goods sold<\/a> (COGS), operating expenses<\/a> (OpEx), and labour costs.<\/p>\n For example, let\u2019s look at this as a quick calculation on a 50% margin:<\/p>\n COGS: $20 (per job)<\/strong> Total cost per job: $58.00<\/strong><\/p>\n Cost of service (50% margin): $87.00<\/strong><\/p>\n While easy to implement, cost-plus pricing has some drawbacks. One, you may be leaving money on the table, as customers may be prepared to pay more than the markup<\/a> you add to your costs. Two, just as customers may be willing to pay more, they may also be unwilling to pay when your costs increase substantially. Cost-plus pricing is reactive to your expenses; if materials and wages rise, so does your cost base. If you operate in a competitive market, you may have no choice but to trim your margin to retain customers, leaving you with less profit.<\/p>\n Value-based pricing uses the perceived worth of a product or service. Businesses determine the value customers are willing to pay for and price accordingly. Industries like tech (Apple), auto (Mercedes), and luxury (Rolex) rely on the perceived value of their products, whether that is image, quality, or both. Production costs are less of a factor in determining this pricing model, and it requires a deep understanding of your customers through market research<\/a>.<\/p>\n Where value-based pricing succeeds is that it allows you to go beyond your costs and increase revenue by leveraging the value you create for your customers. Your business benefits from a stronger brand<\/a>, higher margins, and a more engaged customer base.<\/p>\n Where value-based pricing struggles is in keeping pace with shifting customer values and sentiment; your prices might not match customers\u2019 needs. It also requires significant investment and research to determine the right price, and businesses using this model often take years to reach profitability.<\/p>\n Competitive pricing, or the going-rate model, is when your prices align with market rates or your competitors\u2019. In this model, you need to cover production costs while remaining \u2018competitive\u2019 in your industry. Pricing for retail, hospitality, and airline carriers is heavily influenced by market prices, i.e. what customers are willing to pay.<\/p>\n Competitive pricing adds value to businesses by providing predictability and stability. What your competitor is doing is what you’re doing, and the market sets the standard. No intensive analysis is required. This has its drawbacks, however, because it makes your business reactive rather than proactive. It is harder to charge more even when you provide more value, because the market sets the price.<\/p>\n Tiered pricing is where your product or service has different entry points (basic, pro, premium). This model offers customers options tailored to their purchasing power and needs. Software and professional services often use this model, since not every customer needs the same level of features or service. Typically, they base products or services on the idea of good, better, and best. Your margins increase with the additional offerings at each pricing tier.<\/p>\n Tiered pricing models are effective at capturing price points for different customers. It also scales because your customers will purchase more from you as their needs grow. Issues with this model arise when customers become confused about your offerings or drop from higher tiers, making forecasting unpredictable.<\/p>\n Dynamic pricing, or price surging, depends on demand, seasonality, and availability. This model is elastic; prices are subject to factors that can increase or decrease. Airlines, hotels, and ride-share services rely on dynamic pricing to set their rates.<\/p>\n Dynamic pricing generates high revenue during \u2018surges\u2019 or \u2018peak\u2019 periods of operation, giving you flexibility in your offerings. The negatives come from customer sentiment during peak periods, as value is derived from demand, which discourages customers. Another challenge is the constant monitoring of prices to stay competitive.<\/p>\n Penetration pricing is a strategy in which startups and emerging businesses deliberately enter the market at lower prices, operating at a loss, to attract customers. The idea is that once you have established a customer base, you then raise your prices to gain profitability.<\/p>\n Penetration pricing allows businesses to enter markets quickly and build a customer base. However, while this model can quickly give you a foothold in the market, it isn\u2019t sustainable. To achieve profitability, you need to raise prices, which will affect the customer base that initially flocked to your business because of cheap pricing.<\/p>\n Finding the right pricing depends on several factors about your business: industry, customers, competitors, and your business goals<\/a>. Your pricing model needs to address each of these points about your business. For instance, consider a small business entering a new market. While a penetrative pricing strategy may serve them in the short term, it isn’t sustainable in the long term.<\/p>\n Let’s look at an example of how to implement pricing models into a business.<\/p>\n [\/et_pb_text][et_pb_text admin_label=”Scenario” _builder_version=”4.27.5″ _module_preset=”default” text_text_color=”#0a004a” background_color=”#eeecff” custom_margin=”30px||||false|false” custom_padding=”20px|30px|30px|30px|false|false” border_radii=”on|20px|20px|20px|20px” box_shadow_style=”preset2″ locked=”off” global_colors_info=”{}”]<\/p>\n Mary, a boutique furniture vendor, wants to increase her revenue. Her current pricing uses a value-based model: her customers pay for high-quality, practical, and chic furniture that improves their living spaces. To improve the value of her business, Mary adds an interior design service using a tiered pricing model.<\/p>\n By combining a tiered decoration service with the furniture that Mary’s business sells, she has enhanced the value of her brand. Her business doesn’t just sell furniture; it sells a lifestyle that her customers can buy into.<\/p>\n [\/et_pb_text][et_pb_text admin_label=”End” _builder_version=”4.27.5″ header_2_font_size=”32px” custom_margin=”||0px|||” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n To get your customers to purchase from you, you need to nail your pricing model. Pricing your goods and services under the right model helps customers feel like they get great value from each transaction. This doesn’t just translate to more revenue; it strengthens your brand and reputation and creates a loyal customer base. Whatever your approach, the right model should align your prices with customer expectations, cover your costs, and still make a profit.<\/p>\n [\/et_pb_text][ba_social_share icon_bg=”#03002e” icon_padding=”10px|12px|10px|12px|true|true” layout=”classic” show_text=”off” btn_padding=”0px|0px|0px|0px|false|false” btn_bg_color=”RGBA(255,255,255,0)” _builder_version=”4.23″ _module_preset=”default” custom_margin=”50px||||false|false” custom_padding=”25px||||false|false” custom_css_before=” content: %22SHARE THIS%22;|| font-size: 16px;|| font-weight: 700;|| line-height: 22px;|| letter-spacing: 0em;|| text-align: center;|| color: #ff5447;|| margin-bottom: 10px;|| display: inline-flex;|| position: absolute;|| margin-top: 10px;” border_width_top_main=”1px” border_color_top_main=”#e4e4e4″ border_radii_icon=”on|5px|5px|5px|5px” global_colors_info=”{}” custom_css_before_last_edited=”off|desktop”][ba_social_share_child _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”facebook” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”linkedin” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”email” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][\/ba_social_share][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":" Learn how to choose the right pricing model for your small business to boost revenue, attract customers, and support long\u2011term growth.<\/p>\n","protected":false},"author":36,"featured_media":300155,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":" Changes to how casual employees can transition to permanent employment are coming this year. The new process adds an employee-driven element, where, depending on certain circumstances, a casual employee can notify their employer of their intention to move from casual to permanent employment.<\/p> This is a marked departure from the previous rules, which were entirely up to the employers. So, what does this new process look like, and what does it mean for small businesses?<\/p> Let\u2019s go through it.<\/p> The \u201cClosing Loopholes\u201d amendment has directly changed how casual employees remain casual or transition to permanent employment.<\/p> Under the old rules in the National Employment Standard, a casual employee\u2019s employment status was entirely employer-driven. This meant that any conversation or initiation of a casual employee was through the employer's agreement or arrangement.<\/p> Now, employees can let their employer know their desire to change their working status, called the employee choice pathway.<\/p> Under the employee choice pathway, casual employees can pursue permanent employment by notifying their employers of their intent to change from casual to permanent. The following criteria have to be met before notice can be given:<\/p> The changes have been in effect for medium-large businesses since 26 February 2025. Under the legislation, businesses with 15 or more employees must follow the employee choice pathway procedure.<\/p> The changes will come into effect on 26 August 2025 for small businesses (15 employees or fewer). Under the rules of casual employment, an employee may only notify their intent for permanent employment if they have been employed for more than 12 months.<\/p> The employee choice pathway is twofold: a notice of intent to transition from casual to permanent, and the response to that notice. While this may seem simple, a number of factors determine the outcome. First, before a notice can be made to move from casual to permanent, we must look at what defines casual employment status.<\/p> The legal definition of what constitutes casual employment can be found in the Fairwork Act 2009 (15A). This is a rather large document, so for all intents and purposes, casual employment can be simply defined like this:<\/p> If you are unsure about the definition of casual employment<\/a>, the Fairwork Ombudsman has materials and resources.<\/p> The notice a casual employee gives to their employer about moving to permanent employment requires two factors to be satisfied:<\/p> Here is an example of a notice to demonstrate what this would look like in the workplace.<\/p> Imagine a bartender working casually for over 10 months at a large pub with more than 15 workers. This casual employee has been given more responsibilities in the last few months, including rostering other casuals. The employee has also noticed they work fixed, regular, rostered shifts. With this information and a desire for more security in their employment, they approach their employer with notice to transition from casual to permanent employment.<\/em><\/p><\/blockquote> In this example, the employee meets the requirements to give notice and pursue the casual choice pathway. After notice occurs, the employer is required to respond. Let\u2019s take a look.<\/p> Once an employer receives a notice from their employee, they have 21 days to respond. Before a response is made, the employer should consult with the employee about what changes the transition would make to their employment. This discussion should include:<\/p> After a consultation, the employer can accept or reject the notice of employment change.<\/p> When accepting a change, the employer needs to include what has been consulted previously and provide a new written employment agreement with their employee. The changes must immediately be implemented after the acceptance of employment status unless the employer and employee have agreed on a different commencement date.<\/p> When it comes to rejecting a notice, employers need a good reason. An employer can justify a rejection of the notice when either of the following circumstances apply:<\/p> Accepting or rejecting an employee's notice must be thoughtfully considered, whatever the circumstances, and communication should be clear and concise. If there is a disagreement, it may come down to both sides not effectively communicating. However, dispute resolution procedures are in place if the relationship is beyond solving in the workplace. It also should be noted that protections are in place<\/a> against any adverse actions taken in reaction to an employee submitting a notice.<\/p> Any dispute must be resolved first in the workplace. However, if a dispute occurs due to a disagreement about an employee\u2019s employment status, there are a number of avenues that can be explored:<\/p> Unfortunately, if either of these doesn\u2019t remedy the situation, the matter may have to be resolved in court, arbitrated by the Federal Circuit Court.<\/p> As the changes on the pathway from casual to permanent employment are new, there will be a degree of awkwardness in implementation. What is essential is good communication and honesty when discussing an employee's future in your business. As the date for small businesses to follow the new rules is set for 26 August 2025, there is plenty of time to review your procedures for managing your staff<\/a>.<\/p> You may find that the new process has new opportunities for dedicated employees<\/a> to commit fully to your business. Whatever the employee choice pathway brings, ensure you are prepared with proper payroll systems<\/a> to navigate the changing landscape.<\/p>","_et_gb_content_width":"","inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"categories":[343],"tags":[],"class_list":["post-300152","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-insights"],"yoast_head":"\n
OpEx: $25 (spread across a month and 100 jobs)<\/strong>
Labour: $25\/hr (it takes 1.5 hours to provide service)<\/strong><\/p>\nValue-based pricing<\/h3>\n
Competitive pricing<\/h3>\n
Tiered Pricing<\/h3>\n
Dynamic pricing<\/h3>\n
Penetration pricing<\/h3>\n
How to choose a pricing model<\/h2>\n
Pricing model example<\/h3>\n
Pricing model in action:<\/h4>\n
\n
Pricing models and your small business<\/h2>\n
Key changes to casual employment rights<\/h2>
Who is affected by the employee choice pathway?<\/h2>
The process involved<\/h2>
Defining casual employment<\/h3>
Giving notice of employment change<\/h3>
Responding to a notice<\/h3>
Accepting or rejecting an employment change notice from an employee<\/h3>
What happens if there is an employment dispute?<\/h2>
The bottom line<\/h2>