The other day I saw a busker next to the parking pay station playing on his guitar and singing a popular song. In front of him was his black canvas guitar case and on top were several R2 coins. After I had paid for my parking, I gave the musician R2. As I did this I remembered what a musician had told me while she had busked her way through Ireland. I suggested to the musician that he place a R10 note or two on top of his guitar canvas carrier. He smiled and said he would try it out.
I don’t know whether the busker tried the approach or not but I do know that pricing products and services is based on perceptions. You see if you price too low people don’t place a high value on your product or service. If the busker put out R10 notes, passers-by would notice that the musician placed a high value on his service.
Are you using an effective pricing strategy in your business? Are you pricing your products or services correctly in your start-up?
If you give a little intelligence thought to your pricing strategy in your business you may be able to get it to work for you. An example of a business that has done so is one I came across recently that places expensive items at their front entrance to deliberately project a perception of quality and exclusivity. It works. The instant you walk into the entrance of this retail outlet you get the impression that you are entering an establishment that sells quality goods. If a potential customer wants cheap and nasty, they can go elsewhere.
This retail store also places the discounted items at the checkout rather than at the front entrance. The reason: when customers get to the checkout, they see discounted items and many can’t resist a bargain.
Pricing policy or strategy in your start-up or small business plays an important role in projecting the image you want in your business. A small business adviser who I have enormous regard for says, pricing a product involves striking a balance between giving it the best chance of being sold while at the same time giving your business an acceptable gross profit percentage. Always remember that what a product costs and what it sells for are related issues, he says, but they are not directly linked. Pricing depends on competitive products, the price that customers are willing to accept, the type or quality of the products sold, demand and availability.
Although pricing is part of an important psychological strategy, remember that whatever you price your product at if the quality is poor no one is going to buy it and if they find out afterwards that it is of poor quality the bad news will spread. For example, I saw some fresh pickled fish at a local supermarket that looked appetising. This product was selling at a 40% premium to that of another quality supermarket. On eating the pickled fish I discovered that it was bland, insipid and tasteless. The cheek of it to charge such high price. This supermarket’s image in my mind has gone down.
When you start a business from scratch beginning with a mere idea, you need to know how to develop it, test your prototype and come up with a rock-solid business plan. Pricing will be an important issue in your marketing strategy like distribution employees, sales projections, your value proposition and customer service.
If you need assistance with any of these elements for your start-up or existing business why not put your name down at no obligation for “Breakthrough Ideas”. If you do, you will be first in line to benefit from years of experience in running small enterprises and a treasure trove of practical and workable solutions for those who are just starting up or those who have been at it for some time but need to innovate.