Imagine you've just launched your amazing product or service, and you're excited to see the sales rolling in. But then you notice something – the sales aren't as high as you'd hoped. Or perhaps your sales of existing products or services are in decline. It can be tempting at this point simply to reduce the price or offer promotional discounts, but could you be making matters worse?
Pricing is a key cornerstone of your business, so you need to get it right, and relying on hearsay – or guessing - just won’t do. You need to make informed decisions, understand your market, and ultimately, maximize your profits. When it comes to pricing, research can be the difference between a thriving business and one that fails to generate enough revenue. So, how can you ensure your pricing is optimum?
Reducing the price can have a negative effect - I previously worked in a business that couldn’t possibly be undercut – our online offer was so cost-effective that we were much less expensive than competitors. However, we didn’t win every piece of business we pitched for, so I decided to find out why. It turned out that in some cases (not all, thankfully), we were considered too cheap to be a credible supplier. Prospective customers couldn’t believe they could get a quality service for the price. Pitching your price too low could be seriously damaging to your brand.
Even if your price is not too low, how do you know you’re not leaving money on the table? One of our clients, a tech start up, had a meeting with a supplier one evening and needed to talk about pricing. We helped to run a short survey on pricing for him (in under three hours) that showed he could easily be charging double!
We need to remember that pricing may not actually be that important in te purchasing decision. When we’re trying to sell, we tend to fret about being the least cost, or at least an affordable option, but with experience of many, many surveys over the years, it’s very rare indeed that price is the most important factor in a purchasing decision. Usually, it’s way down the list of things that go into making a buying decision. Finding out what the other things are on the list, above pricing, will help you to judge how well your offer performs and adjust your pricing accordingly. Remember not everyone buys the cheapest smart phone, clothes, car, wine or TV.
Running pricing surveys is commonly thought to be difficult. It isn’t. There are proven ways to make sure you’re not pitching at the wrong level, and they’re quick and easy to do.
Don't leave your pricing to chance. Make pricing research a priority and ensure your pricing strategy is backed by a deep understanding of your customers' needs. By doing so, you'll be well on your way to achieving success and maximizing your profits.