Pricing – no pain, no gain!
Pricing is one of the key challenges when starting and running a business – what price could you or should you charge for your product(s) or services??
Pricing policies help you to think about and determine what and who you are competing against – for example if your product or service is of the highest quality, why set your prices based upon your competitors? – You’re better than them, and surely this should justify a premium?
Alternatively, if you’re operating in a market where the products you sell are “commodities” (i.e there is no discernible difference between your product and your competitors) then your competitive edge may well boil down to price.
When considering and setting prices you could:
– Copy the prices of your nearest competitor (or under cut them slightly).
– Look to add a specific “mark up” to your products purchase cost.
– Target a specific profit margin on each product or group of products?
Whatever decision you take, you can be sure that any decisions that you make around pricing will be absolutely fundamental to your business. Start too low and it may be difficult to raise your prices later, start too high and people may consider you too expensive.
When pricing, what are we trying to achieve?……
As much profit as possible? The highest price that the market and customers will bear? Just low enough that we are cheaper than competitors?…….
….Possibly, but ultimately, the question we are trying to answer is “what value do customers place on our products or services”? If we give customers value, they’ll purchase our goods right?
Well, what about this as a thought…….why not compare the value of your goods or services to one of the bestselling products within the UK – and consider how many times better or worse your product is?
The “Coffee Comparable?” Or “Costa Index??”
One of the most popular “products” on the market today is COFFEE, look around EVERYONE is drinking it! So why not compare the value of your products to a Coffee? Let’s take the typical value of the humble cappuccino at say, £2.50
OK, so I’m a restaurant looking to price my various courses, and considering pricing “starters” at £5.00 – using a “coffee comparable”, is a starter course, in a restaurant, worth twice the value of a coffee – seem reasonable? Probably…..yes.
OK, what about the “Mobile Measurement??”
A typical mobile phone contract these days is what, £40.00 per month? Applying the same logic, if you’re a marketing consultant or an architect you would expect your monthly customer charges to exceed the value of a mobile contract surely, by two, maybe three times??
Ultimately pricing is about “value” what value does a customer get from purchasing YOUR product or service?
Whilst we’re having some fun with this logic, it may just be an interesting thought to have around your products and services…… how much better (or how much additional value is perceived) than coffee and mobiles is your product or service offering?
For detailed assistance and support with your business pricing, why not contact FD Analytical, and tell us how we compare to coffee & mobiles!