Pricing is one of the things that can send powerful signals to your customers, employees and partners.
And yet it is one of those “icky” subjects many businesses prefer not to think about much.
I have often heard business owners say they worry they may appear greedy or think they will lose business if their price is high.
Often their thinking is not based on any rational reasons. Sometimes it can be traced back to their feelings about price.
So let’s look at the price and signals.
If you think about any market there are premium products and services, ones in the middle and the cheap and cheerful. And they price accordingly.
Premium
- These products or service can command higher prices due to certain factors such as exclusivity, specialised knowledge or service, high demand and low supply.
- The quality must live up to the pricing, however this is not usually a problem as they have a very definite focus with their business and marketing model.
- They also are pretty clear on their difference and don’t worry about what others are doing.
- You often see them charge a set price rather than a rate per hour in service businesses.
- They keep an eye on their competitors but they are certainly not following them and their actions.
Middle
- Often if you find these businesses have a less focused approach. They don’t want to be amongst the cheap and cheerful but for a number of reasons can’t match the premiums.
- It is like playing it safe, so you may find they offer similar products as services as their competitors, in a similar way at an average price with a similar message.
- You often find they offer a range and don’t really specialise.
- Because of this customers can think their products or services are in the okay category.
- Not great, not awful. Just average.
Cheap and Cheerful
- Sometimes the cheap and cheerful works if you have an extremely low cost base and there is huge demand.
- Interestingly customers who frequent the cheap and cheerful can be more demanding than the premium’s customers.
- These service businesses rarely set prices. Instead you may find them open to give you freebies or reduce their price in the hope they can get a foot in the door or charge more on another project.
Pricing is one of the key elements when developing your marketing marketing strategy so it is important you make sure you are sending the right signals.
What tips can you share to that you use to send the right pricing signals?
Hi Susan,
I think if you can avoid that comparison factor with others in the marketplace and really assess the value within the product or service that you offer, and price accordingly you set the standard of expectation for your customers.
Value perception is a funny thing…you don’t see people trying to find “cheap” surgeons. There’s an expectation that price is commensurate with experience or skill etc.
You have to remember that you are positioning yourself with your pricing strategy too.
Jackie recently posted..What Makes A Good Website?
Hi Jackie,
I see what you are saying, however the reality is we do compete in markets and competitors’ pricing needs to be taken into account. It doesn’t mean you have to price the same. People do compare when they are looking for something new.
Good point for service businesses as an extremely low price can be detrimental which is probably not want they intended.
I don’t know if you remember last year or the year before when there were reports on Australians going to Asia for plastic surgery as it was a lot cheaper.
Ha…you’re right, I’d completely forgotten about overseas surgery thing. Seems my perception might be a little off kilter with whats happening in the market on that front.
I know myself personally I wouldn’t be shopping around on price when it comes to anything surgical…but hey thats me. I suppose our views are coloured by our own perceptions all the time.
PS> I’d like to see that article too that Julie mentioned if you could forward it along that would be great.
Jackie recently posted..A Tool To Remove Repetitive Tasks In Your Online Business
Will send when I get it.
I couldn’t understand price shopping re surgery either. Money not the issue if someone was going to cut into my body. Surprise surprise many had problems when they got back and had to get the procedures fixed.
Hi Susan, I was reading a video “big-wig’s” blog post where he proudly announced that he would be DOUBLING his prices for 2012 in what I saw as a rather arrogant way. The strangest part? The responses he got were really favorable. Go figure… Good points!
Julie Weishaar recently posted..Check Out Facebook Check-In
Hi Julie,
I wonder what he was basing his decision and whether any of those say it was a great idea where his customers. It is a shame when people follow this type of advice without thinking it through for their business and customers. Would like to read the post so if it is okay can you email me the link?
Great post. I firmly believe that if you’re looking for premium clients, you have to charge the premium price. Having said that, I always work with people’s budgets, as long as they’re reasonable. One guy asked me to cut the price in half for him because he was “starting out”. I told him “tell that to the landlord of your building or your mechanic”. I can testify to doing cheap and cheerful work and getting more demands, that’s why I stand by premium prices.
Dennis Salvatier recently posted..Your Design Needs a Facelift
Hi Dennis,
Like your response to that guy and the funny thing is he probably would not like someone asking him to cut his price. I am sure your clients enjoy your premium work and do not have a problem with your prices.
Is Your Pricing Sending The Right Signals? | M4B Marketing…
As part of your marketing mix and strategy, getting the pricing correct for your product or services can have a large impact on your business. Get it right and you can grow your business. Here are a few signals your pricing may be sending….
“If you think about any market there are premium products and services, ones in the middle and the cheap and cheerful. And they price accordingly.”
Hello Susan
Perfectly agree but these categories works for general stores. When you are targeting high-end customers (hence big commissions) you should stick with premium products.
Just my two cents.
Radu recently posted..7 Ideas For Adding Fresh Content
Hi Radu,
I agree with you re premium products if you are targeting high end customers.
Good points Susan. Can’t help thinking of Chevas Regal. A mediocre Scotch whisky hired Jerry de la Femina to promote them globally.
Jerry de la Femina raised the price and the design and packaging made it look exclusive, expensive and regal. Many people in the world still regard it as the best whisky there is:-)
Food for thought.
Catarina Alexon recently posted..Is Iran stronger than the West believes?
Hi Catarina,
Thanks for sharing that and it is a good example of the power of perception. Consumer companies have done this so many times and it does work at times.