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Today I am talking about price

It is one of the four P’s of marketing, that is product place, price, and promotion. I know there’s a lot of people who like to add all the other P’s into the four P’s, five P’s, six P’s, and seven P’s of marketing.

Personally, I stick with the four fundamentals and I think pricing is something that largely, particularly in small business, gets quite overlooked in terms of its relevance to marketing.

So, obviously if we’re in business, when we look at how much we’re actually going to charge for a product or service we, well let’s hope that we, consult with our accountant or do our numbers.

When we price a product or service, we price in some profitability for that. We want to price something so that we are doing more than just breaking even on delivering a service or a product.

This is something that I struggled with for a while in terms of selling a service.

I used to cost my units of time, and then I used to price my units of time instead of using my units of time as a costing and then pricing those according to value. That’s what I actually want to talk about today, is that perception of value and how that relates to price.

So, you’ve done the numbers, you’ve crunched the numbers, you’ve worked out how much it costs you to deliver product X or service Y and then you’ve assigned a price to that based on those costs of delivering that and including some profit margin for the business.

That is not my area of expertise, so I won’t elaborate too much more on that, but when you’re looking at that price don’t forget to factor in how people are going to perceive that price in terms of value and how that price stacks up to the competitors.

 

How does your price compare to competitors?

If we’re going into a competitive market and there’s a range of different prices for similar services to what you offer or similar products to what you sell, and there generally will be, I suggest you do your research on this and just aggregate the numbers.

What’s the average price that businesses in your market are charging for this?

There’s going to be the lower end of the market, and then there’s going to be the higher end of the market. So, where does your price, once you’ve done all your costings, actually sit within that?

If you’re actually priced up at a premium level, up around the higher end of the pricing point, in terms of your marketing and pricing you’re going to really have to demonstrate the value that you bring for that product or service and the value that actually warrants your pricing to be more than the average price.

Similarly, on the other end of the scale, if your price is a lot lower than the average price, there’s almost got to be a reason for that.

Think of your target audience and think about the price point that they might expect to pay for your product or service.

If your customers and target audience are used to paying the average price, or even a premium price for similar products or services, and you go in for the undercut, because for some reason you can just produce this product or service far more efficiently than your customer, there can actually be a little bit of suspicion that is aroused by being too low, unless you use your marketing to communicate why you sit at that end of the pricing scale.

So, it might be really important for you to say “we’re able to bring this to you at such an affordable price, because we’ve done this, this, this, this, and this. It’s got nothing to do with our quality and there’s nothing to be suspicious about. We can actually just genuinely bring you a well-priced product.”

So, there is quite a few considerations from a marketing point of view to think about for price.

 

How does your price align with your other P’s?

There’s the product or the service side of things. So again, if you are producing a really premium service or product, your price probably can afford to reflect that.

Don’t feel like you have to lower your price to be on par with your competitors, just because they’re selling at that price. If you’re actually providing a ‘heads and shoulders above’ level of service or product than your competitors, that’s fine to charge the premium price, but communicate what makes it better.

Also, think about how you’re actually distributing your product.

So, for example, let’s just say you’re just selling your product or your service online which is exactly the way that the world’s kind of going at the moment, which is great, and this kind of slides over into the promotion of your product as well.

If you’ve got a premium priced product and you’re selling this premium price product via your website, but your website’s a real dive or the branding doesn’t really reflect that look and feel and the copy and the images, if that’s not reflecting a premium price then all of a sudden, you’ve lost all trust and faith from the consumer.

No one wants to buy an expensive product from a really shitty looking website.

So again, that’s your place of business. This is where you’re selling something. If you want to charge a premium price, make sure the place of selling is actually premium as well.

For bricks and mortar services or offices, for example, if you’re a professional service, if you’re charging a premium price, make sure that when someone walks into your store, into your office or into your organization, it looks premium.

Don’t be letting your customers or your clients walk into an office that’s littered in the old daggy furniture with holes in the chairs and signage that looks like it should have been updated 20 years ago, stacks of paper that have been piled up on the desk because you’re a hoarder, or whatever the case may be.

It’s the same with shops or your organization. If you’re charging for that premium product, you really want that essence of premium to be evident at all touchpoints.

 

One thing to consider for pricing is discounting

I’m not a fan personally of discounting.

The reason why I don’t like to discount is because I just think as soon as you actually start discounting on your price, you start to tell the customer a story. “So, I’ve set this price, but I’m actually going to take money off that”.

Why?

Are you desperate to sell?

Did you price it too high to begin with?

As a customer I benefit from this, but I’ve seen a lot of organizations who discount so regularly that their customers only buy from them when they’re discounting. Which is fine if that company has set a price level that caters for the fact that people only buy when they’re actually on sale, it just seems over complicated to me.

Why don’t you just price yourself properly in the first place and train your customers to buy at the price that it’s worth?

Discounts can be a race to the bottom. You discount, then your competitor discounts, so you discount again and then they discount. It’s a bit counter-intuitive.

Also, I think it just sets the customer up for bad habits. I am much more inclined to actually add value.

If you know you are at a similar price point to your competitors, for example, or if you feel like you need to demonstrate more value, throw something extra in. Throw in an extra hour of your time or throw in a little extra product. There’s plenty of different things that you might be able to add value with.

Once you list out a whole stack of things that they might get for their money, people just use their logical and rational brain to go down that list and go “tick, tick, tick, tick. That’s a lot of things that I’m getting for that price. That looks good”.

 

A lot of people are not going to make their decision based on your price

If you’ve managed to engage them emotionally and really demonstrate that your product or service delivers an aspirational lifestyle or convenience, time-saving, or your brand offers them a tribe to be part of that they really want to feel like they’re part of that gang, the price becomes secondary because they just want it.

They just want your product for whatever you’re offering.

So again, that’s where you really need to think about how the four P’s align, and particularly the price.

The other thing that you can do if you’re offering online or offline programs, courses, events, or anything like that, is you can actually offer early bird pricing.

Rather than discounting your tickets because no one is buying enough tickets, why don’t you discount them in the first place and offer early bird pricing?

For those people who don’t get in quick enough, they pay a little bit extra. That way you’re still able to offer a couple of different price points but not have to discount or look desperate.

Anyway, there’s some pricing considerations for you to think about.

I hope you have found this useful.

Happy marketing!


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Podcast Transcript:

Jane Hillsdon:

Hello, and welcome to another edition of snack time. I am talking about price today. One of the four P’s of marketing that is a product, place, price and promotion. I know there’s a lot of people who like to add all the other P’s into the four P’s and five P’s and six P’s and seven P’s of marketing. Personally, I stick with the four fundamentals and I think pricing is something that particularly in small business gets quite overlooked in terms of its relevance to marketing. So obviously if we’re in business, you know, when we look at how much we’re actually going to charge for a product or service, well, let’s hope that we consult with our accountant or do our numbers. And when we price a product or service, we price in some profitability for that. You know, we want to price something so that we are doing more than just breaking even on delivering a service or a product.

And look, this is something I know that I kind of struggled with for a while in terms of kind of selling a service. You know, I used to kind of cost my units of time. And then I used to price my units of time instead of using my units of time as a costing and then pricing those according to value. And I guess that’s what I actually want to talk about today is that perception of value and how that relates to price. So you’ve done the numbers, you’ve crunched the numbers, you’ve worked out in terms of how much it costs you to deliver products X or product or service Y and then you’ve assigned a price to that based on those costs of delivering that and including you know some profit margin for the business that is not my area of expertise.

So I won’t elaborate too much more on that, but when you’re looking at that price, don’t forget to factor in how people are going to perceive that price in terms of value how that price stacks up to the competitors. So say for example, and let’s look at that first of all. So if we’re going into a competitive market and there’s a range of different prices for similar services to what you offer or similar products to what you sell, and there will generally be, and I suggest you do your research on this and just aggregate the numbers. You know, what’s the average price that businesses in your market are charging for this. And then there’s going to be the lower end of the market, and then there’s going to be the higher end of the market. So where does your price once you’ve done all your costings, where does your price actually sit within that?

So if you’re actually priced up at a premium level, so you’re up around the kind of higher end of the pricing point in terms of your marketing. And in terms of that pricing, you’re going to really have to demonstrate the value that you bring for that product and service, the value that actually warrants your pricing to be more than the average price. Similarly, on the other end of the scale, if your price is a lot lower than the average price, there’s kind of almost got to be a reason for that because sometimes, and again, think of your target audience and think about the price point that they might expect to pay for your product or service. But if your customer, if your target audience is used to paying the average price or even a premium price for similar products or services, and you go in for the undercut, because for some reason you can just produce this product or service far more efficiently than your customer.

There can actually be a little bit of suspicion that is aroused by being too low, unless you use your marketing to communicate why you sit at that end of the pricing scale. So it might be really important for you to say, we’re able to bring this to you at such an affordable price, because we’ve done this, this, and this. So we can actually be, you know, it’s got nothing to do with our quality. You know, there’s no, there’s nothing to be suspicious about. We can actually just genuinely bring you a well-priced product. So there is quite a few considerations from a marketing point of view to, to think about for price. The other thing is, think about how your price aligns with your other piece. So there’s the product or the service side of things.

So again, you know, if you are producing a really premium service or product, your price probably can afford to reflect that. So don’t feel like you have to lower your price to be on par or on average with your competitors, just because they’re selling at that price. If you’re actually providing a, you know, heads and shoulders above level of service or product than your competitors, that’s fine charge the premium price, but communicate what makes it, makes it better. Also think about how you’re actually distributing your product. So, you know, if, for example, let’s just say, you’re just selling your product or your service online which is, you know, perfect, which is exactly the way that the world’s kind of going at the moment, which is great, but think about, and this kind of slides over into the promotion of your product as well.

If you’ve got a premium priced product and you’re selling this premium price product via your website, but your website’s a real dive or the branding doesn’t really reflect that the look and the feel and the copy and the images, and this is the promotion side of things. If that’s not reflecting a premium price, then all of a sudden you’ve lost all trust and faith in the consumer. No one wants to buy an expensive product from a really shitty looking website. So again, you know, that’s your place of business. This is where you’re selling something. So if you want to charge a premium price, make sure the place of selling is actually premium as well. You know, for bricks and mortar services or, you know offices, for example, if you’re a professional service, again, if you’re charging a premium price, you know, make sure that when someone walks into your store into your office or into your organization, it looks premium.

You know, don’t be letting your customers or your clients walk into an office. That’s kind of littered in the old daggy furniture with holes in the chairs and, you know, signage that looks like it should have been updated 20 years ago. You know, stacks of paper that have been piled up on the desk because you’re a hoarder or whatever the case may be, same with, you know, shops or your organization. You know, if you’re charging that premium product, you really want that essence of premium to be evident at all touch points. One more thing about pricing and what to consider there is discounting. I’m not a fan personally, not a fan of discounting. Some ways that you can get around discounting and look, the reason why I don’t like to discount is because I just think as soon as you actually start discounting on your price, you start to tell the customer a story.

So I’ve set this price, but I’m actually going to take money off that, you know, why are you desperate to sell? Did you price it too high in the begin with I’ve seen a lot of and, you know, as a customer I benefit from this, but I’ve seen a lot of organizations who discounts so regularly that their customers only buy for them, prompt from them when they’re discounting. So, which is fine, if that companies kind of set a price level that caters for the fact that people only buy when they’re actually on, it just seems over complicated to me. I like just, why don’t you just price yourself properly in the first place and train your customers to buy at the price that that it’s about was so discounts can kind of be a race to the bottom.

You know, you discount, then you competitive discounts and then so you discount again and then they discount, it’s kind of a bit counter-intuitive. And also I think it just sets the customer up for bad habits. I am much more inclined to actually add value. So if you know, if you’re at a similar price point to your competitors, for example or if you feel like you need to demonstrate more value, throw something extra in, so throw in an extra an hour of your time or throw in like a little extra product. There’s plenty of different things that you might be able to, to add value with. And once you kind of list out a whole stack of things that they might get for their money, you know, people might just use their logical and rational brain to go down that list and go, Oh, tick, tick, tick, tick.

That’s a lot of things that I’m getting for that price. That looks good. Of course, you know, a lot of people, if you’ve done your promotion correctly a lot of people, if they’re not going to make their decision based on your price, you know, if you’ve managed to engage them emotionally and really demonstrate that your product or service delivers, you know an aspirational lifestyle or convenience, time-saving you know, if your brand offers them a tribe to be part of that, they really want to feel like they’re part of that gang, you know, the price becomes secondary because they just want it. They just want your product for whatever you’re offering. So again, you know, that’s where you kind of really need to think about how the four P’s align and particularly that price.

The other thing that you can do is if you’re offering online programs or courses or events or anything like that, or even offline any of those, you can actually offer early bird pricing. So rather than kind of discount your tickets because no one’s kind of buying enough tickets. Why don’t you discount them in the first place and offer the early bird pricing. And then for those people who don’t get in quick enough, then they pay a little bit extra. So that way you’re still able to kind of offer a couple of different price points but not have to discount or look desperate. So anyway, there’s some pricing considerations for you to think about I hope you have found this useful happy marketing.

 

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