4th May 2021
You paid how much for that makeover?
How much does a roll of wallpaper cost? No, it’s not a trick question. With so much debate in the media about the cost of redecorating a certain flat in London, I found my thoughts wandering to the subject of pricing strategy again.
Here at Aardvark, we talk about pricing to almost every client we have ever worked with and very often we’re trying to persuade them to increase prices. Or at least consider the possibility of changing their pricing structure. However, I think a great many marketing professionals don’t get involved in pricing and this strikes me as very strange.
Price is one of the four “P”s, and in my view just as important as the other three. I know there are many more “P”s now, not to mention collections of other terms beginning with other letters (we even talk about the two “C”s in success), but 35 years’ experience has shown me that the original four “P”s remain a great foundation for successful marketing.
If pricing isn’t right, it will dilute the impact of all the rest of your other marketing activity. It could even completely undermine it. Too high and you’ll lose potential sales (now or in the future) and allow competitors to steal your customers. Too low and you will most obviously leave money behind that you could have taken, but can also turn off customers or attract the wrong kind of customers in the first place. As a business owner, would you rather be a busy fool, sending our numerous quotes or proposals that don’t actually lead to good business or send a smaller number to better targeted prospects and convert a higher percentage of these? We worked with a local builder who achieved a better work life balance through this approach. Better targeted marketing and new messages enabled him to stop working every weekday evening. He no longer needed to go out on a site visit, measure up and then produce a detailed quote to homeowners who only wanted the cheapest option. He was able to switch his attention to fewer, ‘on-profile’ customers who appreciated the high quality of their work.
So how is pricing set in your business. Is it a “cost plus” approach with a target profit margin? Is it based on competitor analysis, aiming to maintain an agreed relativity to what the competition offer customers? Or is it based on the perceived value of your products or services?
The value-based option is almost always preferable. It will encompass competitor-based pricing and if it means your margins are thin or even non-existent, then the business needs to re-examine its cost base. And of course, the people in the business who know most about customer perceptions of value are the marketing team. It’s our job to understand and represent the customer within the business, and that includes knowing what people are prepared to pay for our products and services.
Are we out there, talking to customers about value and how we compare to alternatives? By “alternatives” I don’t just mean products and services like ours, but all the things customers could do instead of buying from us.
Or are we checking our competitors’ prices on the internet, and letting sales tell us the reason (excuse) they can’t hit targets is that the competition are so much cheaper than us? Are we giving away price because margins are good so we can “afford” to discount?
Have you implemented a price increase recently?
And a final thought; if your suppliers are putting up prices more often that you are, something is probably going wrong! If you’d like to understand how pricing strategy can improve both your business and your quality of life, why not email or pick up the phone to Gill or Chris at Aardvark?