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? Typically, you want something quite good, not the cheapest, but you can’t justify the most expensive, right?
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. Let’s take buying wine – you’re having a date night so you can’t get the cheapest, you’ll look cheap and it’ll most likely taste horrible. But seriously, does the most expensive one taste THAT much better?
Generally speaking, most people will opt for a wine somewhere in the middle – the bottle looks nice, it’s bound to taste pretty good – it’ll do.
Price is an incredible marketing tool.
Price can be used on so many levels. Price can be used in sales promotions of course but be careful about reducing your price unless that matches your positioning, otherwise you might devalue your brand and be perceived as that cheap wine.
Positioning is how you want your potential customers to feel about your business. This is where branding comes in. This is about hearts and minds. But enough about positioning, that’s another P for another time.
If you are going to have a sale of some kind have a reason behind it and make it short lived. Yes, it will attract new customers but are they the right kind of customers? Will they stay loyal to you and become a repeat customer, or will they seek out the next bargain once your product or service returns to its full price?
If you can be sure that a price promotion will attract x amount of new leads or customers and you put a strategy in place to convert a certain percentage of these new customers, then yes – go for it. If you can get contact details of any new leads or customers then a price promotion can give you the opportunity to grow your database and, as long as you then use it effectively to communicate your offer, build your brand understanding and keep your customers and prospects warm, you might find a price promotion can pay dividends in the long run.
That being said, if you are using price very strategically to encourage sales, be mindful that price, as outlined in our wine scenario also reflects quality. Make sure that you aren’t too cheap.
Many small businesses in the UK could put up their price, not lose any customers and increase their margin pretty much overnight. Could you?
Getting the price right
Within price of course is the basic accounting rules of ensuring you are covering all of your costs and making a profit. You need a really good handle on your numbers, so you know what budget you have available to spend on your marketing as well as what you are charging for your product and service and how much margin you have to ‘play with’.
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 shouldn’t be the only consideration.
The customer is always right
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.
Marketing, in our view, is how well you can serve your customers, profitably. The more you know about your customers the better you can fine tune your marketing messages. You can use your existing customers as a blueprint to find more. With that in mind, one of the first things we suggest that our customers do is a customer survey. Research your market. Don’t be afraid of feedback – anything bad, you can work on but anything great, you can use to promote your product or service.
If all of your customers feel you offer something unique, that is amazing value for money, they will most likely pay more to stay loyal to you. In this instance, you should be asking yourself, what am I waiting for? This is a strong indication that you can increase your prices, keep your customers and increase your profits.
Let us help
Need to implement a pricing strategy? Want to run a promotion and use it effectively as a lead magnet for new customers? Would like to implement a communication strategy to keep prospects warm? Want a bit of help conducting a customer survey or want to find out more about positioning?
This is all stuff we do, day in, day out. Let Fill the Gap Marketing help you get your offer right and work with you to grow your business profitably. Book your complimentary marketing consultation today, we would love to help you.