The real reason that customers are not buying from you is probably not related to your prices. It’s far more likely to be that you haven’t given them a clear understanding of the value they will get when they do business with you, or you have not given them a compelling reason for buying from you versus the competition. This is why pricing strategies are so tied to sales and marketing, and how Rathbone Results can make huge improvements to your bottom line.
Pricing strategies which lower prices
One of the first things that you may do when faced with either a tough economy, or when you have difficulty in attracting customers is to reduce prices. Pricing strategies which lower prices are the most dangerous kind.
It is vital to understand that most companies do not buy on price. The widespread belief that everybody is looking for the cheapest version of everything is simply not true. If this were the case, everybody would live in the cheapest houses, drive the cheapest cars, wear the cheapest clothes, and have the cheapest holidays.
There is another reason to do everything possible to avoid pricing strategies which lower your prices. Even if it increases your sales now, have you really increased your overall margin? Moreover, it will make it very difficult for you to charge the prices that you deserve in the future.
Pricing strategies which differentiate prices
Work instead at pricing strategies which differentiate your pricing based on:
- Customer type
- Product type
Pricing has such a major impact on business profit and it is worth becoming really competent in this area. A small improvement can make a significant difference.
Most businesses base their pricing strategies on cost + mark up and not on the value they bring their customers and their position versus the competition.
There is big money on the table when it comes to pricing and costing strategies. Rathbone Results has a proven record of helping businesses improve their net profit % by 2 to 3 percentage points by using effective price management and differentiation. For a company with sales of £10m this can be an additional £200k-300k net profit.