16 Business Tips
RIGHTPRICE P
HOWTOSET THE
ricing is analogous to a farmer harvesting his crop. It’s the way product and service providers gather in their share of the value
their efforts have created. Pricing is the most important of the four Ps of
marketing. It is literally the only means available to the seller for capturing value so, in your marketing strategy, Price needs to be aligned with Product, Promotion and Place in order to create a viable value proposition. Your Price sends a signal to your customers about what you think your product or service is worth. This is a far louder message than advertising or any other form of Promotion! Consequently more resources should be devoted to Pricing than the other three Ps.
Each customer will create a price ‘band’ based on their perception of the value – to them – of what you propose to do. A price outside this band, at either end, will be ignored. (Really! Would you actually want to eat a pizza that was being sold for 3p?) You need to discover this band each time. Although Service Providers don’t supply commodity ‘stuff’ or tangible goods, they still need to be wary of how they, and therefore their customers, view their services. A low level service business charges for activities, such as fixing a leak. A higher level of service business might charge for the time a customer spends with them – for the ‘experience’ – such as an evening spent at the theatre.
But a Professional Service Provider operates on
an even higher plane, causing the customer to demonstrably achieve certain outcomes. Professional Services are ‘transformation’ businesses. Decide what type of service business you are because this will determine how you arrive at a fair price. Some service businesses will behave like
suppliers of commodities, tangible goods or activities – Cost accounting in minute detail, trimming costs and adding an arbitrary profit
| October 2011 | Volume1 | Issue2
What is ‘the right price’? Indeed is there such a thing as ‘the right price’? Even a ‘fair price’?
margin to arrive at their prices which they then publicise like an online bookstore. Others will behave like just the type of service business they are not – they will charge at an indefensible hourly rate for the length of the ‘experience’ the customer gets from them. There are much better ways!
VALUE PERCEPTION You need to price your customers, not your services, so that you are dealing with those who get the most value out of working with you. To do this you need a means to discover the value that each individual customer is perceiving. You have to segment your customers by
how much they’re willing and able to pay. Forget demographics! Get them to differentiate themselves each time they’re thinking of buying. Great pricing strategies are designed to get customers to reveal the maximum they are prepared to pay. You need to price your services like an airline prices its seats on the same flight!
This is very easy to do when you’re providing
services! Very few Service Providers would lose all their customers if they raised their prices and it is particularly easy to sub-divide your customers at low cost because you will be having a sales conversation with them. And it is impossible to create a black market in services because they can’t be sold on! Professional Service Providers occupy a market that most sellers would die for – The ability to establish a price with each individual buyer at extremely low cost. Service Providers really should be taking advantage of the strong position they naturally have, simply by asking the right questions in a sales conversation! If you would like to find out more about making sales without selling and getting paid what you're worth, visit
www.sws3.co.uk to download 30 more free practical ideas that you can implement straight away in your business. Or you can contact David directly at
david@davidwinch.co.uk
www.pro-landscaper.co.uk
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