Pricing for Profit – you’re worth more

 

Pricing for Profit – you’re worth more

Pricing for profit

Pricing for profit is a difficult subject for many small businesses as they believe they are operating in an extremely competitive market. Certainly many believe that their customers are very price driven.

We have regular conversations where customers wonder why one of their local competitors appears to be making much more money than they are? Could it be that they are just more confident of their pricing policy and know what they need to charge, so simply put in higher prices? Are they selling the perceived benefits of their product and making it seem more valuable? By starting at a higher price are they able to offer a discount or ‘cheaper option’ and still end up getting a good price?

We also have equally regular conversations where a client was won a contract where they later find out that their price was well below, sometimes 50% below, what another company had quoted! You can imagine the scene as they go from elation to despair as they realise how much money they have saved their customer. Of course, if they have priced the job properly they should still be happy, but you have to wonder about their  valuation of their services.

It may be that your business could sell it’s products and services in packages (i.e. Gold, Silver, Bronze), which will allow you to confidently pitch a high price with an automatic fallback position. If you pack your ‘Gold’ offering with low cost/high value benefits then customers can feel good about paying a premium price or negotiate themselves a bargain value for money deal.

A good idea is to find out what your existing customers believe are the most valuable benefits that you offer. Customers often place a high value on benefits that are way down on the suppliers list, so make sure you are selling the right benefits. This was illustrated when we bought a new front door a few year ago. It came with a 10 year guarantee, which my better half thought was a major benefit, even though the door it replaced was 80 years old and doing fine!

To organise a Pricing for Profit meeting or register to attend our regular workshops email: admin@profitabilitygroup.co.uk

About the Author

Brian RussellBrian Russell FCA is a Chartered Accountant with over 30 years of experience working with owner managed businesses in North East England. He formed Russell & Co in 2000 to build upon his experience to provide high quality part time financial directorships for smaller companies particularly in Newcastle upon Tyne and Northumberland. Russell & Co is based in Ponteland.View all posts by Brian Russell →