It is vital when working out how to market your business that you consider a pricing strategy. Virtually every product-led industry has its low-cost leader who buys in so much bulk that others cannot compete effectively on price. For example Wetherspoon’s for pubs, SpecSavers for opticians, RyanAir for airlines, Aldi (arguably) for supermarkets, Primark for clothing and Eat for Less for baguettes.
There has been a similar tendency with service industries, though less pronounced.
There is no point in any of these industries trying to hold and maintain the second or third cheapest. However, the solution, not to compete on cost, is easier said than done especially in today’s environment.
The way to get round this is to compete on the much maligned word “value”. Value simply means” the worth of something compared to the price paid or asked for it”. Unfortunately, many marketers have used it as a synonym for cheap and low quality.
Good value occurs when a client is satisfied that he has had a good return on his investment with you.
The secret is to increase the value of your offering in the eyes of your target market. Different people, thankfully, want different things so they value things differently.
Take a product, like a mobile phone. There is a compete range of these each with its own pros and cons. Your choice of phone is to a large degree dependent on cost and the value you place on the features it offers.
If you defined your target market then you could tailor your product or service and stress the features and benefits that they value. They will then weigh the cost of your product against the value it offers to them. You can sweeten the deal further by giving a bonus offer. Research has shown that bonuses work better than discounts so always add to the value instead of subtracting from the price.
One point you must consider when working out how to market your business is the status, values and emotions your clients and prospects associates with your product or service.
Take for example Cristal champagne; people pay so much for this as they associate it with feelings of exclusivity, power and sophistication. These are feelings that some people prize highly and it is these exact feelings that they are really willing to pay a top price for rather than just the content of the bottle.
A few years ago, I came across a small fish and chip shop that used KPMG as their accountants. When I asked why, they replied beacuse they wanted the reputation of being a successful business! They did finally change accountant as the credit crunch bit in 2009. They saved £30 000 a year and could have saved another more but they still wanted to deal with a large accountancy company.
If you can compete effectively on price, then go for it by all means. Just keep on the lookout for people trying to undercut you.
And if you can’t compete effectively on price then stay out of that race, add more value to your offering and hold fast to (or even raise) your prices.