Memorable marketing solutions exclusively for small businesses in Buckinghamshire, Berkshire and Oxfordshire     July 2008




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.



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.

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