Set Your Prices So It's a Win, Win, Win Not only should you charge based on the product sold, but also on what your brand represents to customers.
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Pricing is difficult for small-business owners and marketers. You can never know if you've gotten it right. It's a strategic struggle for any brand.
I think it's because we constantly question ourselves about pricing. If you hadn't priced it so high, would it have sold more? Would it have sold any less if I'd priced it higher? Should I be higher or lower than my biggest competitor?
The questions are endless, with very few answers. Unfortunately, we have to deal with a lot of uncertainty in many areas of marketing and pricing is one of them.
Related: How to Set Prices When You're New in Business
I have a fundamental belief that I think holds true in any category or industry: pricing should be a win, win, win.
First and foremost, your customer should win. You'll never get anywhere with your brand if the customer doesn't feel like they're winning. Your pricing should reflect the value that they get from engaging with the brand, every time. You never want to leave them doubting whether what they paid was worth it.
When it comes to your pricing, all third-party distributors should win. If there's a middleman in your business model, then your pricing has to work for them too, otherwise they will drop you for the nearest competitor. Don't cut them out of your pricing model. Embrace them and they will embrace you. This includes your sales force as well -- anyone responsible for getting your product or service out there.
When it comes to your pricing, you need to win too. This is your business, and you need to make a fair profit. Small-business owners can tend to feel guilty and give away the store. It's human nature but it's not good business. Price to make your business successful while balancing the needs of your customers and distributors where appropriate.
There's one more factor to consider as you map out your pricing strategy. In this series we've been discussing the difference between products and brands and pricing should be an area of great priority. As you determine how you want to price your product or service for a win, win, win, you should also consider the pricing from a product and brand perspective as well.
Related: Don't Be the Cheapest, Be the Best
When looking at pricing from a product point of view, you will most likely look at your direct competitors as benchmarks as well as what you think the market will bear for your product's features and benefits. That's a good start but it's only the beginning.
You should also look at pricing from a brand perspective, and bake into your analysis how your customers interact with your brand. Your brand has tremendous impact on your ability to price, so don't ignore it.
Pricing toward the brand can go in either direction: Perhaps your brand warrants a premium price, or perhaps you've positioned it as the low-cost option in the category.
Take a look at the coffee shop category. The price of coffee at Starbucks is very different than at Dunkin' Donuts or 7-Eleven. Each has taken into consideration their brand equity in determining pricing. The companies haven't only considered the product's role in pricing, but also the impact that their brands have on price perception.
Starbucks customers are willing to pay more for the Starbucks experience. Everyone wins.
7-Eleven customers are happy to buy coffee at a more affordable price. Everyone also wins.
Pricing based on the various brands in the category ends up creating a different hierarchy than if the pricing was based on the products alone.
You should do the same with your business and your pricing strategy. Take a look at it from both a product and a brand perspective, and find the right balance to make everyone a winner.
That way, you'll be winning too.