Discretionary spending is down, people are dipping into their savings to maintain their lifestyle and the Age of Bling is behind us. In such a climate, only the brave would consider putting up their prices – or would they?
Pricing is one of the trickest issues for any business, but particularly challenging for a new or start-up business that is looking to establish market share and build a critical mass of customers to cover running costs. The key to deciding where to pitch your fees or price for your product depends on what you are offering to your customers. Here are the essential questions you need to ask yourself before setting a price:
1. Am I offering a commodity or a premium product? If you are simply looking to shift high volumes of basic goods where there is very little differentiation between your product and that of your competitor, then you are selling a commodity product and you will need to compete at the lowest price you can. Contrast this with a premium product like the Apple iPod. There are plenty of other great MP3 players on the market which play music as well as the Apple, but they are not selling the lifestyle image of cool and cutting-edge design.
2. Is my product unique? You can go a long way to making your product stand out from your competitors by looking again at your USP (unique selling point). What are the design, quality, service or unique customer experience that you offer that is not available from your competitors? What makes you special? Being able to identify and articulate this to your customers enables you to charge a higher price because you are delivering quantifiable value.
3. What is your brand? Are you going for top-end quality (bespoke furniture or clothing), mid-range quality, or budget fun? Can you offer a range of products to suit the demands of customers, rather than “one size fits all”? Can you offer a package that offers outstanding value while still making you a profit?
4. What is the ethos of your business? Look at a company like Smile, (the Co-op Bank) or First Direct. These are examples of businesses with a clear vision of how they wish to do business and treat customers. Smile takes an ethical stance while First Direct has invested heavily to ensure that it offers high quality customer service and responsive call centres. When you identify what inspires you and where the passion lies in your business, you can communicate this to customers in your interactions with them and your marketing literature.
5. How do you resolve problems? This is often the test of a well-structured operation and excellent staff training. Companies like Marks & Spencer, Lakeland, and John Lewis have all done exceptionally well in communicating that a positive customer experience is vital for repeat business. Given that clients and customers are now able to vent their frustrations much more publicly via social networking sites, it pays to have clear policies in place to deal with complaints. A customer who feels they have been treated well in the face of a difficulty is likely to become an advocate of your brand and your business.
In my next blog I’ll be looking at how to use social networking to market your brand and build customer relations.
Until then, best wishes, Marianne