|
How
much?!!
Pricing is
one of the most common areas of concern that I come across when
working with small businesses. Many of
them are unsure of just what the right price should be for
their product or service. Others feel boxed in by the
pricing levels set by their competitors. And just about all of
them feel frustrated they can't charge the level of price that they
think their offer is really worth.
Being
happy with your approach to pricing
The start
point that I recommend to my clients is to do the basic sums that
determine a realistic range of prices that you can operate
within. Whilst pricing is rarely a perfect science, that's no
excuse for not starting with a logical approach.
On one
side of the equation there are your costs, the volumes that you'd
expect to sell and the level of profit that you need. On
the other side there are the customer's perceptions of the value of
what you sell. If you operate in a highly competitive market,
then the customer's perception of value may be very entrenched and
largely fixed to a well known 'market price'. But in other
markets the customer may have little tangible idea of what
this thing costs.
Once you
have an idea of the range of pricing you can make a rational choice
as to where to peg your offer and why. You may never get the
highest price that you'd like, but at least you should be happy that
you know why your price is set as it is, and what factors affect
it.
And
remember that going forwards there are still a few ways to
increase your profit. The main ones are; 1) by
reducing your costs, 2) by selling a greater volume or 3) by
increasing the value that your customers feel is in your offer (and
thus be able to sustain a higher price). Often the area that
you have most control over is the third one. You might be able
to increase the value that a customer sees in a product offer by
adding services, and similarly a service offer that includes
product can be sold for a higher price.
This
simple approach should allow you to formulate a pricing regime
that your are comfortable with. A regime that allows you to compete
effectively in your market and make enough profit. However, it
might just highlight that your offer is genuinely uncompetitive, and
maybe you should rethink what you are
doing.
Avoiding
comparative shopping
One of the
by-products of the internet is the rise in comparative shopping.
It's so easy on the web to visit many suppliers and check who's the
cheapest. If you are operating in a market where comparative
pricing is rife there are a still few things you can do to protect
yourself from downward price pressure.
One option
is to look at how you can alter the way that you package your
offer in terms of its price. For example, if you were in the
IT support business you might well price your service on an hourly
rate basis. And so might all of your competitors.
Assuming that I think that you are all competent to fix my IT
problems, then it's dead easy for me to compare hourly rates and
pick the cheapest. But what if you priced your service differently,
maybe on an annual maintenance contract basis that entitles me to as
many hours as I need with no limit. It's much harder for me to
compare now, as I'd have to guess how many hours I might need over a
year and divide that by the contract cost. You could of course
help me by illustrating a worst-case (but realistic) scenario of a
large amount of hours, which divides down to an excellent
hourly rate.
Another
option is to vary the content of the offer. Continuing
with the IT services example you could add components that make your
offer sufficiently different. So, for example, you could offer
a 'hot-standby' PC service, whereby you'll swap out a broken PC with
a temporary one until the original is repaired. The temporary
PC needn't be the latest specification, but just good enough to
get the customer by. It's probably a relatively low cost
service for you to offer, but of high value to a customer who's PC
has just blown up!
A
third option is too look at volume discounting and/or differential
services. This option changes the pricing metrics of your
offer depending upon the volume bought by the customer. Volume
discounting is very common anyway, but maybe you can vary the
volumes that trigger the discounts or the alter the discount levels
to achieve a competitive advantage. In the same vein, the
differential service approach looks at bundling in service elements
as part of a larger volume commitment, such as free delivery or same
day despatch over a certain value.
All of the
above options serve to introduce some opacity to the comparative
shopper. Not for the purpose of hiding your pricing or
deliberately confusing the buyer, but to make your offer
distinct from all of the others. And with the right
explanations on your website and marketing materials you can
easily explain why you offer is superior to the other in terms of
total delivered customer value.
Memorable
marketing
Thinking
and working pragmatically like this will help you to make
your marketing work better for you in a more memorable way.
This means that your target customers will be able to differentiate
your products and services from those of your competitors and
clearly see the value in buying from you.
If you would like some advice on memorable
marketing techniques for your own business, or you know someone
at another business who might need help, then please contact us. The sooner you start, the sooner you will benefit. |
|
Pricing
Download this handy guide which explains
how best to approach developing a pricing strategy in
order to improve business effectiveness.
Written by
the Chartered Institute of Marketing as part of
their Directors' Briefing series, this document makes easy
reading for business people of all experience
levels.
Marketing
Effectiveness Assessment
A
free service to small businesses in the Buckinghamshire, Berkshire
and Oxfordshire area, the Marketing Effectiveness Assessment
delivers a professional audit of how a business is using the tools
of marketing to communicate to existing and potential customers. It
also includes a series of simple and cost-effective marketing
activities that the business can implement immediately and at low
cost.
Download the factsheet now.
Useful
Links ...
Adduce Marketing
Chartered Institute of Marketing
Marketing UK (information portal)
Marketing Profs (free articles)
Back
Issues ...
Marketing
Memorabilia |
