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7 pricing tactics and how to decide what’s right for your business | Business Business Business

Pricing strategies

Lowering your price just because your next-door competitor lowered theirs is not advisable.  Nor is it likely to be sustainable in the long term.  This tactic, referred to as “reaction pricing” is usually a lose-lose situation.  The likely response from your competitor is a further lowering of their price and it soon becomes a race to the bottom.  No-one wins this race.  A general rule of thumb is that a customer’s perception that your price is too low can be as damaging as one where your price is too high.  The adage, “if it sounds too good to be true it probably is” is very relevant in this context.

The other real danger with trying to be the lowest price vendor is that you must also always be the lowest cost operator to sustain that position.  If your only tactic is being the lowest price vendor, then you risk being stranded when a lower cost operator comes along.

It is equally vital not to price yourself out of the current market.  Rather than just knowing what your competitor’s prices are it is important to understand what they are marketing as their “unique” selling point.  Armed with this knowledge, you can then develop and promote your own point of difference to justify a different pricing level.  Price your services accordingly, demonstrate the value of your products and services to your customers, show them they get the best “bang for their buck”, this is often referred to as a premium pricing strategy.  For this strategy to work effectively you must be able to demonstrate the extra value to your customers and communicate it effectively to them.

Keep an open mind to negotiation to win business.  This requires planning and works effectively when implemented properly.  Determine the lowest price you are prepared to negotiate down to (but no lower) and build a negotiating premium above this as your starting point.

A few more pricing strategies you can consider, straight discount-for-volume (for when your customer purchases large quantities), loss leaders – products you have and are prepared to sell at a loss to attract and gain new customers, and two-part pricing – a straight up fee option or a per unit charge.  Lastly, peak pricing, where a premium is charged for custom or last minute orders is another effective pricing alternative worth considering.

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7 pricing tactics and how to decide what’s right for your business – Business Business Business.