Tips for Determining Effective Pricing Policy
In an ideal world, attracting new customers and maintaining existing relationships happens in sync with a rise in profits.
Then reality kicks in. A low pricing strategy may increase customer interest but result in lost revenue, while a high pricing strategy may alienate customers.
So what do you do?
You’re not alone. We’re continually asked and review pricing policies for our clients. So here are some simple points or tips for you to consider when reviewing and implementing your pricing policies.
Profit? Yes Please
The rule of thumb to increase profits is – do your research and sell your brand.
Research – your foundation
Research is the foundational building block of your pricing strategy. The research must cover the market, a benchmark or competitor analysis and an understanding of all of your costs.
Market research is essential when it comes to pricing. First, look at national, regional, and local industries to determine pricing baselines for your goods and services. Secondly, find out the ceiling price or the highest price that customers are willing to pay for your goods and services. In both extremes the question ‘why?’ needs to be asked and answered.
The results enable an informed decision for where your prices should fall and why.
Benchmarking is a valuable tool to compare your goods and services with your competitors’. Competitive analysis and competitive pricing will help you determine how your prices compare to local, regional, or national competitors.
Factor in All Costs
Understanding all costs including office space, equipment supplies, and fringe benefits like social security and health insurance, environmental demands like legal and tax constraints, when deciding on your pricing policy. If the price that you would like to set does not meet these costs demands, you may want to reconsider your pricing strategy or figure out a way to rectify your cost needs and pricing goals.
Implementing Pricing Policy
Are your products or services unique? Why should customers buy your product or service instead of a competitor’s? Unique business concepts and services may help protect your business from falling industry prices- because customers are more willing to pay higher prices for niche goods and services they cannot find elsewhere.
Customers would be willing to pay more for a brand they trust and/or are more likely to become repeat customers. The development of your ‘good name’ is important.
How Do I Attract and Maintain my Customer Base?
Selling your brand – developing brand exclusivity and a good reputation – attracts customers. However, to keep the customer base that you have developed requires (1) a customer reward system; (2) clear communication.
Reward Customer Loyalty
Customers like to feel special and unique. Implementing a reward program for repeat customers are a good way to build long-term relationships with loyal customers.
Communicate Your Services
Communicate the uniqueness of your products and services to attract customers into doing business with you by honing your marketing materials and message. Be straightforward and transparent with fees and other charges; it is a gateway to superb customer service in keeping customers happy.
When you are planning your pricing policy, keep in mind the two important factors of high profits and strong customer base. Remember to do your research and sell your brand to improve your profit margins, but don’t forget to reward customer loyalty and maintain outstanding customer service to keep up with those gains. At the end of the day, the two go hand in hand in insuring the success of your business.