The minefield of pricing decisions - part one

You have identified the service you want to offer to your customers, you have worked out what makes you unique and why folk should buy from you. Now you need to determine the price you want to charge. And this is one of the most difficult tasks to do.

The first personal and often gut reaction you need to set aside when making pricing decisions is any feelings of inadequacy you might have. This is business, not a popularity contest. Never mind if you feel you should give away your service, the reality is that you need to charge a fee.

Where to start though? Surely price is where it is all going to happen. If your service is too expensive then nobody will buy from you. Well, it doesn’t actually work like that. Determining the correct price depends on a lot more factors than just being competitive.

If you make the decision that you will be competitive on price, then your approach  to your marketing strategy needs to reflect this. Of course this is not a bad thing, this is purely a decision you make. If you feel you can still make money and be the cheapest, or one of the cheapest, providers in the market then that is a route you can take.

All your marketing then needs to focus on pushing that price advantage. Every bit of material you send out, your website, business card, brochure, leaflet needs to lead with this point. And lets face it in economic times as we are living through right now, price can be a great motivator for customers to pick your service rather than somebody else’s.

It’s the same thinking as the pages and pages of retail advertising that make their way into your post box. It shows product and price.  One can comfortably assume that the price next to that can of baked beans is going to be immensely competitive. With other words it is unlikely you will get this product cheaper at any other competing store during the term of the offer.

What if your service is more sophisticated and you can’t actually compete on price. With other words you have so many added benefits to your offering that you would go broke, before you even started, trying to compete on price.

There’s no problem with that either. After all Porsche has successfully sold their cars at premium pricing for years. It probably costs them a fraction of the selling price to manufacture their cars. But they only want to sell a few to ensure there is an exclusivity factor to their product. A high price certainly fits into this strategy.

So when deciding on price, the first consideration to make is whether to serve an exclusive few customers or whether to want to serve everybody. The answer to this will assist you in working out your pricing structure. It’s not the only one of course, but let’s start with this one.

More to follow on this very sensitive topic. Subscribe to my RSS feed or sign up to my e-mail newsletters to stay in touch and informed.