What’s your pricing strategy?
Establishing a price for the goods and services you supply is never straight forward. There are so many different ways to arrive at the price you charge.
Peter Cook, CEO of Thought Leaders Business School say that “we are all dysfunctional about money.” I think this is worth bearing in mind when it comes to working out pricing.
So what is pricing strategy?
It’s a conscious plan for your pricing, using a methodology that ensures that when you make a sale and state how much it costs, both you and the prospective customer can see the value and that the price allows you to operate a successful business within your resources.
The challenge we have, is the prospective customers are all different. £1 to a millionaire may have a different value than £1 to somebody who is living on the bread-line.
There’s a well-known story about a family having a house clear-out, who decided to part with a dresser. Rather than the hassle of putting it up for sale, they decided to give it away to anybody who might want it. They left it at the end of the drive with a sign on it that said: “free to whoever wants me”. The dresser sat there for several days with no takers.
The householder decided to change the sign. Instead of “free to whoever wants me” he changed it to “dresser for sale £30”. Within a few hours, the dresser had been taken – or one might say, stolen.
So how can we get this right?
A pricing strategy takes into account:
The psychology of price within your market
The price you ‘need’ to charge
The true cost of what you sell
The price you ‘should’ charge
“Price is what you pay. Value is what you get. ”
Running a business, whether you are a single person or a global business, without a pricing strategy, is a bit like going to war without a plan. You end up setting prices without an understanding of how those prices help you achieve your overall goals.
Something to reflect on for 2020?
