Which feature of your product does EVERY buyer ask about? Which sales tool is your best closing device? Which feature immediately differentiates you from your competitors? You guessed it, your price.
Yet, I'm always a bit surprised at how little time businesses spend on their pricing. Since this is a key marketing variable for any small business owner, here are some thoughts on setting (and getting) the right prices.
Price is a promise
Let's say you are grocery shopping, and you come across two brands of cereal. One is a well-known brand of flakes that comes packaged in a 20 oz. box, contains a toy and is priced at $4.99. The other is a store brand of flakes, packaged in a non-resealable plastic bag and sells for $2.99. Which one would you buy?
If you based your purchase decision on price alone, you’d pick the 28 oz. bag for $2.99 and be on your way. But there’s more to price than just that, isn’t there? There are the promises involved. In this example, the $4.99 brand promises you the highest quality ingredients and taste, an extra toy that could occupy your kid while you watch reruns of The Dick Van Dyke Show, plus the convenience of a re-sealable package.
Although this example deals with cereal, similar decisions are made by buyers in your market. Each time a buyer chooses a product, they match up a price with its promises. So, as the marketer of a small business, it is your job to understand what are the price and promises for your service.
Determine your promises
As you set your prices (or consider raising them), take stock of all the value factors that go into your price. What attributes of your product or service are noteworthy? Below are some examples of value factors that go into a product’s or a service’s price:
For a product:
- Quality of the raw materials
- Finished product performance
- On-time delivery
- After-sale service
For a service:
- Experience level of the service provider
- Bottom-line impact of the final deliverable
- Appearance of the service provider
- Turnaround time on phone calls/emails
- Ability to meet deadlines
As you can imagine, your ability to deliver various factors, over and above your competitors, directly impacts the prices you set…and get. If you promise certain factors, yet fall short on delivering them, your price will be challenged through customer complaints, delayed payments or customer defections.
About the Author
Jay B. Lipe is the author of The Marketing Toolkit for Growing Businesses, a guide for any small business wanting to get its marketing house in order. He is also the CEO of Emerge Marketing, a firm devoted to helping small business owners improve their marketing. He can be reached at firstname.lastname@example.org or through Emerge Marketing.