Revisiting the Four Ps of the Marketing Mix, the second P is Price.
Price is a large determining factor in your brand strategy. Are you an elite brand or bargain basement? Maybe you are somewhere in between. If you have an average price tag, then that’s not an important feature and won’t lead your brand strategy. You’ll need to focus on product, place, and/or unique promotion to make your brand sparkle.
Why go high?
If you want an elite brand, then price your product high. People are happy to pay for things they really want, even if they have to save up to buy it or use your service. For you as a business owner, it offers you a way to work less and still make money. If your time or your product becomes harder to acquire, you’ve added some mystique. People desire and seek what’s rare. It becomes a status symbol that they were lucky enough to get to work with you or fortunate enough to afford your product.
Why go low?
There’s something very friendly about offering a low price point. People feel so savvy when they find a deal, especially when they can buy multiples ($6 each or Four for $20). As they buy more, they save more and pretty soon they have their gift-buying done for the year. There’s an art to pricing things so that you make the most profit.
Don’t go too low. You need to price it so you cover your costs (materials, your time, and your overhead) and make a reasonable, perhaps slim, profit. If you are able to keep your costs down and still make money, you can surely make your bottom line based on volume. High volume sales work in concert with a supply chain based on purchasing supplies in high quantities at a lower price.
Why establish an average price?
When you have a middle of the road price, you aren’t expensive, you aren’t cheap. You won’t be accused of gouging customers, and you won’t set the expectation of always making a slim margin. However, you have to deliver a quality product. This is a very conservative, safe pricing plan. Secure, low risk.
If you are not the most or least expensive product in your niche, then you have to capitalize on one of the other Ps to breakthrough. This can be the quality of your product, your reliability in delivering the product, a wider selection. It can also be based on place. Where is your product? Is it more accessible geographically than your counterparts? It could simply be up to your promotion. You might have a great mascot that people adore. Or maybe you support a cause that your customers want to support with you. That becomes part of your promotion.
No matter how you price your product (even if your product is a service), you must feel comfortable with it. In the end, you deserve to be paid a fair price, to be successful and to make money to support yourself, your family, and employees. Most of all, you deserve to have fun doing it! If you price yourself into a deficit you will only experience that deficit and that is not fun.
Look after your pennies, and your dollars will look after you.
For more technical information on how to determine your price, read this article in Inc., here.
Leslie A.M. Smith founded McCormick L.A. in 1994 offering public relations and marketing consulting to nonprofits and small businesses. She recently published Laws of Promotion. The 50-page promotional guide for small businesses and local nonprofits is available now on Amazon.