January is a month to think about a fresh start, spring cleaning, de-cluttering and reviewing aspects of your business. One of these could be your pricing strategies. Are you as competitive as you could be? Are you charging too much and therefore losing business? Are you charging too little so your margins are too tight?
What Are you Competing with?
To be confident about your answers to these questions, you need to have some other knowledge under your belt. One of the most important elements of this has to be knowing your competitors, what they are charging and what value they are delivering. Only then can you know how the value of your offering compares.
What people want is value for their money, and that may not be the cheapest. If your products are of better quality, you can charge more and people will buy as long as they recognise this. If your services bring more returns, you can charge more as long as your customers are aware of it.
The Pricing/Marketing Mix
So, as your outsourced bookkeepers would tell you, a pricing strategy is all mixed up with how you present yourself and persuade your targets of the value you will provide. Another aspect for a small business could be the value it brings to the local community – how well known you are for joining in or sponsoring local events and employing local people, perhaps with apprentices. A friendly personal service and total reliability also adds up to value.
If you have strong competition, what you have to avoid is a price war in which no-one wins. Statistics from research projects indicate that dropping prices to gain sales volume doesn’t bring higher profits. The January sales are more about making space for new stock than about gaining revenue.
Packaging the Offering
If you can’t compete like-for-like with other local businesses or major companies, try out the principle of bundling and offer packages that need a one-off investment but bring greater benefits that equal higher value to the customer. It’s important to let your target markets know how you are different, how that will make things easier or pleasanter for them, and what they will get out of it.
Whatever you do, you need to focus on value and getting this across to customers. Why not sit down with your bookkeepers for a discussion on price and value? It’s always good to get opinions from people who have familiarity with the business but can remain objective.