This is part three of a four part series on marketing your biz better by avoiding bad practices.
This part centres on Pricing and Positioning.
- How does pricing affect products and services?
- How would a change in pricing be perceived by a consumer?
- What pricing and positioning should you choose for your company?
In today’s climate, positioning and pricing are becoming more and more difficult to define.
As a general rule of thumb, high prices are set for higher positioned products or services and low prices are set for lower positioned products or services.
With a market looking for high quality and position, but for low prices, some companies are blurring the line.
Let’s take a look at what defines the price of a product or service:
- Time involved to source, make or work on
- Skill / expertise required
- Difficultly or ease of sourcing materials or talent
- Customisation needed
- Quality of service or good/s
- Reputation of person or company
Now let’s look at what defines positioning of a product or service:
- Reputation of person or company
- Overall quality provided
- Customer service and level of service
- Amount of options
- Associations and partnerships
- Public perception (How they/other rate them)
You may have noticed that there is a crossover of elements in both lists. This is a positive link; as one rises, so does the other.
The public may not be aware of everything involved, but they are aware that a superior offering will cost more. They also know that if they are seeking something that requires customisation, extra attention to detail or a higher quality then the reputation and branding of a company will play a vital role in their choices.
What effect will a change in price have?
If you are considering a change in pricing, then think very carefully. Even a slight change one way or the other will change the perception of your offering.
Changing to a higher price
If your prices are going up, you need to justify why.
- Are you sourcing higher quality materials?
- Have you improved your service?
- Are you providing an additional skill or bringing more knowledge?
- Have the materials you are sourcing increased in value / become rarer / custom treated / environmentally friendly?
Make your customers aware of what changes have been made and they are more likely to accept the adjustments in price.
Changing to a lower price
Again, despite the fact that you may feel a decrease in pricing will be well-received, you do need to justify why you have lowered your pricing. Customers may be skeptical.
- Are you providing less – smaller quantities / less time / less expertise?
- Are your items or services inferior in some way – cheaper materials / more readily available materials / lower quality or attention to detail
- Are you using less packaging or a cheaper way of transportation?
- Are you simply responding to a change in customer demand and testing new markets / customers / levels of service?
In both cases be clear on the reasons why and ensure that you are meeting (ideally exceeding) your bottom line. Be aware that people will expect the two to marry up – price and postioning.
Steps to consider when choosing
When considering a change in price and/or positioning, follow these steps:
- Throughly research your options
- What are your expectations and goals? Will these changes meet them? What are your sales projections?
- Look at each stage of the process – from design to delivery. Where can adjustments be made?
- Rollout your changes in line with a plan
- Be prepared for any questions and changes in customer behaviour (good or bad)
- Monitor your changes and evaluate
Finally, I would like to thank Sean O’Sullivan for the topic of this blog. A worthy one for discussion. If anyone else has an idea for part four, please let me know via comments.
Have you changed your prices in recent times or at any point for your business? What prompted these changes and what effect did they have on profit, sales or customer perception?