One way of deciding your price is by working out how much it costs you to produce or deliver your product or service, and then adding a margin. But that’s not the only way.
Have you considered a strategic pricing strategy?
What if you could charge much more than you do now for no extra cost? People don’t always buy on price. The purchase decision is often based on emotion as much as logic. How often do you choose something in the middle price bracket – because you want something quite good, not the cheapest, but you can’t justify the most expensive?
In this scenario we are basing our judgement on the quality of the product based on its price. Price tells its own story. Very often we assume a product is of inferior quality because it is cheap and therefore we might not buy it. If you saw a Rolex watch in a shop on sale at £50 would you buy it? Probably not because your instinct would tell you that it might be broken / stolen / a copy.
I was shopping in my local town this weekend, and my young son wanted a pencil for school – a very specific one his friend had which looked like a giraffe. So I found myself investigating pencils! I never did find the giraffe one, but in one well know high street stationery shop there was a red pencil with times tables written all over it and a rubber on the end. It was £1.39. In my search for the giraffe pencil, I then went to a different shop, equally well known on the high street but for household goods as well as stationery. They had that exact same red pencil: In a pack of 6, for just £1.59. The shops were virtually next door to each other. I’m not privy to how many pencils each store sells and what the profit margin is but I’m assuming people buy these pencils in both shops. Possibly even more in the first shop because it specialises in stationery.
The thing that is most valuable to your customers might not be the thing that is the most expensive for you to produce. Talk to your customers. Find out what they value most. Research your market. Could you increase your prices?
If you would like Jo Wilson to speak about pricing at your conference or networking event, please get in touch.