by Richard McCandless, Regional Director – Scotland & Newcastle
How to create a pricing strategy that makes your sales skyrocket
When running a business, whether service or product based, it can be so tough to know where to start with pricing.
Do your research and don’t pluck numbers out of thin air. Consider the skills and experience of your team as well as the value that your business provides to its customers. Work out how much you need to cover the cost of your overheads, i.e., software, equipment, and so on.
Read on as we guide you through creating a pricing strategy that will have people lining up to buy from you.
Do some shopping around. Find out how much your competitors charge for similar products or services. What are their pricing strategies? Do they offer packages or discounts? Do they have a tiered offering?
Consider how your prices compare to the overall market and put yourself in the shoes of your customer. How can your business add further value?
Remember that if you under-price your offering, in comparison to other similar businesses, the perception may be that the value provided is also lower and that the quality won’t be as good.
Survey potential customers to gauge how they value your business and its offerings. Find out what they think about your current pricing structure or how much they would be willing to pay for your products or services.
Stand your ground!
Customers are ultimately looking for their needs to be met and their pain points to be resolved. Small businesses can offer a more personal and bespoke service, and this is often a priority for customers over the price. Believe in the value that you provide for your price.
Perhaps think of it this way, you are charging for the work you cannot take while working for this client. Be aware of the true value of your time. You should feel content with what you charge – if it doesn’t feel right, it probably isn’t. Value your worth and set your fee appropriately.
Consider a range of pricing strategies
If you run a service-based business, consider offering packages or tiered pricing. For example, you could have a Gold, Silver, and Bronze offering. The Bronze package would be the most basic level of support, whilst the Gold would be all the bells and whistles.
Take the example of purchasing software online, there are often different levels of support available: there may be a free version or trial to hook you in and allow you to get a feel for it, whilst the premium version offers 24/7 customer support and other benefits.
By offering multiple price points, you will be opening your business to a wider customer base with varying budgets. This structure is a great way to get a customer ‘in the door’ by meeting their basic needs for a price that works for them. As you build a relationship with the customer, you may encourage them to rise up the tiers – more of their needs can be met and they will receive increased support.
Other common pricing strategies include bundle pricing, whereby several products are sold together for less than they would cost individually, and value-based pricing, which involves basing pricing on how much you think a customer believes the product/service is worth.
Experiment with pricing strategies and gather feedback to determine which works best for your business. You may need to implement different strategies for different offerings.
Up-selling to your existing customers is the most effective way to increase profit and drive growth. Your current customers have shown loyalty towards your business and clearly like what you have to offer. Therefore, they won’t need as much convincing to buy further products or services, perhaps closely linked to a purchase they have already made.
Online retailers or food delivery services do this well, by displaying items and stating “You might like this” or encouraging you to add extra items to your trolley when it comes to the purchasing stage.
Once you have bought something online, this may be closely followed by an email to draw you back to the company website to buy something else.
Always be thinking about how your business can add value. Offering value and high quality and delivering on it will make you stand out from your competitors and keep your customers coming back.
Rather than offering discounts or negotiating a deal, why not offer a value-add of something for free once they have made the initial purchase?
For example, a business consultant may offer 1:1 support with a follow-up phone call thrown in.
To summarise, deciding on pricing isn’t something that should be rushed. The way that you price your products and services is a reflection of your business and how you value your customers. Choose a pricing strategy that focuses on the value of your offerings, allows you to share your prices confidently, and is flexible to change and evolve as your business grows.
Know your worth, stand your ground, and don’t be pushed into discounting.
If you would like any further support, please don’t hesitate to contact me through any of the below.