Marketing Planning - How could you get there with Price?
Step 3c and the second of our Ps - price. Given its direct relationship to revenue price is perhaps one of the most under-appreciated of the Ps, one that deserves a bit more time in your strategy and planning.
Price x sales translates to income - but even more than that it is a key part of your communication process. As buyers, when we look at the price of a product or service we make all sorts of assumptions. Price is therefore a short cut way of sending/receiving messages about quality, differentiation, value, performance, aspiration - and even about ourselves as consumers. It can get psychologically very heavy!
Your pricing strategy needs to be consistent with the rest of your market positioning - and with your objectives. Your external analysis should have included information on the competitive environment and your internal data gives you the cost base. From then on you can be as creative as you like!
You can vary your pricing strategy to:
- Bring sales forward
- Encourage trial
- Develop repeat business
- Promote scarcity
- Limit demand
- Shift unwanted stock
Don't always assume you should be looking to lower prices however. We all worry that it is price being too high that is stopping customers buying from us but studies show that it is rarely the key factor in purchase decisions, unless all other aspects are equal. Customers generally look for value - and if you can convince them of the value they will justify the price to themselves. They will balance issues of quality and service - including how quickly you can deliver and how much they like you.
A useful equation to remember is VALUE = PRICE + QUALITY + EXPERIENCE. And we've all experienced having chosen the cheapest solution and regretted it I'm sure!
In this step in our marketing planning journey you should be ensuring you have considered all the options open to you - 'which way is best?' comes later.
I've talked before about the story of the jewellery shop owner who wanted to get rid of the range that wasn't selling. She left a message for her shop assistant to put it all on sale at 1/2 the price. Her hastily scribbled note was unclear however, and the shop assistant read it as x2 and so doubled the price. When the owner returned the stock had been cleared - increasing the price actually made the jewellery more desirable!
A higher price could also mean you are more profitable. It's worth considering, particularly when you're thinking of introducing offers or discounts, if you could make the same income by selling less (saving cost) or doing less work. Teaching our coaching programme students how to do contribution analysis is one of Jim's favourite bits of our course!
Pricing can be a minefield, but small businesses should make the most of the control and flexibility they have in setting their prices. If you're struggling with this subject here are 7 ways to take the fear out of of pricing:
- Test, test, test ‒ don’t assume you’re right straight of, be prepared to make mistakes and learn from them
- Reinforce benefits ‒ because you’re worth it!
- Offer bonus/add-ons ‒ these are usually low cost to you but may translate to significant value to customers
- Decrease perceived risk ‒ offer guarantees and trials
- Overcome objections ‒ make sure you are communicating value to customers effectively
- Provide range of options – create upsell opportunities targeted at specific customer segments
- Value yourself – sell yourself/your business positively and never apologise for being expensive
Above all, treat the pricing P with the respect it deserves! When you've got your pricing options together keep them safe - next time it's Place!