15 Mar 2019
The pricing strategy of a business is one of the most important things to get right – and it needs to be right from the very beginning. Switching and changing once you have already launched your business is a bad look, and one that certainly won’t fill your potential customers with much confidence.
The wrong pricing strategy means, in the worse cases, that your business will ultimately (and perhaps extremely quickly) fail. You won’t be making the money you need to survive. However, get that pricing strategy right and you can ensure that you reach the goals you have created for your business and for yourself – the path to success will be so much smoother.
In the past, customers might not have been quite as savvy as they are today; they might simply have accepted the price you were asking for your products and services and paid it. Today, thanks to tablets and smartphones and comparison sites – or just the internet in general – they can easily check that they are paying a fair price; they might even do it standing in your shop. Don’t worry, though; low prices might attract attention but they don’t always win out; the smart prices do. Here’s how to price smart in your business and win more custom as a result.
When people go to your website, they will want to know what something costs. They need to know what something costs. They usually won’t have a lot of time, they know what they want to buy, and they simply want to see your pricing. If it’s not there, they’ll go somewhere else – it’s not many customers today who will take the time to contact an online store and ask a question about pricing; if you’re not displaying costs, you’re losing business.
You might not like to show your pricing due to fear that the competition will use it against you, or you might even worry that your prices are too high and you think you’ll scare customers away. The thing is, if no price is displayed the gut reaction of those potential customers is highly likely to be to imagine that the prices are out of their budget anyway, so there’s really no point in not showing them. Having your prices on display might make you feel fairly vulnerable, but it will also increase your sales so it’s certainly a risk worth taking.
Think About Cost Last
The majority of retailers will price their goods by starting with the cost price and working upwards, adding a percentage depending on how much profit they want or need to make. For your customers, however, this is not in the least bit important; they don’t care how much you paid for something – they just want to know how much they are going to be expected to pay for it when it comes to spending their hard earned cash.
Look around at the marketplace and determine what the average cost of such a product might be. Look at your competitors’ pricing (yes, they will be doing the same to you, but that’s helpful; it keeps everything on a much more even keel) and remember that some variation within the market is a good idea as long as you can add some form of extra value. You can charge more, in other words, if the customer feels they are getting more for their money. It might be that you have free gifts to give away, money off vouchers for the next time they shop with you, or perhaps it’s your excellent customer service that makes them feel special. Whatever your added value is, you can charge for it and people will pay if it’s good enough.
Once you know what others are charging and what you can throw in additionally to bump your price up somewhat, then you can look at your costs. If you can’t make a profit despite all of this, choose a different item to sell. It’s either that or mark it up for a high price, and it won’t sell at all so you’ll still not be making any money.
When it comes to your pricing strategy think ‘brand’ not ‘category’ or ‘product’. Every brand that you carry will have its own pricing strategy built in; it starts with the manufacturer and then it handed down to the wholesaler, to independent stores, and finally to the customer. So don’t just assume that because you are selling X made by Y and your competitor is selling X made by Z that you can use their pricing strategy as a jumping off point. It’s the brand that counts; there are some brands that are highly expensive (and expected to be) and others that really aren’t. If you price each item the same no matter who makes it, you’ll find that you have some items that are making a massive loss, and others that are priced far too high. Clearly in both situations it’s a negative thing for your business.
Research More Than One Guide Price
When you know what you are selling, you’ll be able to check out the guide prices and what your competitors are doing. The key point here is not to simply check one place and assume that that’s the way to do it. Research more than one online pricing strategy and determine how different they are (if they are), and how you can use that information in your own business.
The more guides you can piece together, the more accurate a price you will have; one that is fair to you and to your customers.
There are many different ways to get your pricing strategy in place, but not all of them are going to be right for you. You need to factor in a number of additional ideas including how much you paid, what your competitors are selling these products for, what your customers expect, and what additional value you can give to ensure that not only is your pricing fair but that your customers will return to you time and again.
Pricing is not something that you can rush into, and should be a major part of your planning. Don’t have everything in place to launch your business, or even a new product range, and then just dash the prices off because they seem about right. Take your time to ensure that they are going to work for everyone, and only then should you display them. Changing prices once people have started to see what you are doing will be held against you, and any trust that you built up could easily disappear.
Are you interested in price monitoring? Book a demo today to see how Competitor Monitor could benefit your business: