In the last of my 7 marketing myths I tackle pricing - a subject that has the potential to tie us all in knots, with most businesses being concerned about over-pricing and losing customers.  In truth this fear means it is more likely to be the case that you are under-pricing your services!  Not a trivial matter as price is the only business variable that is directly linked to your income.

I heard the following definition of marketing used in a presentation once – and it made me smile!

“Marketing’s objective is to be able to charge the highest possible price for what you offer – and for people to smile after!”

What this highlights is that it is value people are after, and if they get the value they expect and/or need then the price will be worth paying.   You only have to examine your own buying behaviour to be convinced the lowest price is not the only factor in your decision making.  Do you always shop in the cheapest supermarket?  Eat in McDonalds? Drive an Eastern European Car?  Wear clothes from discount stores?

Probably not.  At least not all the time.  As a key part of your marketing, price sends a powerful message about where you are positioned in the market, and what your customers should expect.   Those companies charging higher prices for seemingly similar goods are successfully convincing their buyers that they offer additional value – be it in the engineering, the service, or simply in the branding and packaging!  Reliability and trust in your service are worth a premium to businesses who are too busy to want to have to re-do things when they go wrong.

Pricing is a complex issue, with many factors to take into account: target audience expectations, competition, fixed vs variable costs, target profit margin, long vs short term gain.  The discount end of any market is a difficult place to operate unless you really have the lowest costs - and ask yourself this, are the customers who only focus on price and quibble every penny the ones that you want to be doing business with.  You can choose where you position yourself if the rest of your offering backs it up.

 “Quality is remembered long after the price is forgotten.” Ed Sabol, founder NFL Films. 

One advantage many small businesses have is the opportunity to vary and test their pricing to find out just how sensitive their customers are.  My advice would be, having weighed up all your options on the above factors, start off slightly higher than your first instinct.  You can more easily lower price than raise it, as many companies who have rushed to discount in the recession will find, and you might be pleasantly surprised to find that the increased profit per transaction makes up for slightly lower sales.

And before you even consider lowering your price make sure you have done everything you can in your marketing to identify and communicate the value of what you are offering.  Otherwise you are just throwing money away!