5 Apr 2019, 10:56 — 6 min read
Whatever you are selling, be it product or service, the price you set for that offering is one of the most important decisions you can make as a small or medium enterprise (SME). If you aim too high, you can drive away potential customers. Of course, asking too little can have a similarly negative effect, with buyers potentially assuming a lower level of quality.
Complicating things even further is the increasingly larger role that customers are now playing in the pricing process. You’ve heard the saying, “The customer is always right?” Well, this concept seems to be proving itself many times over.
As described in Marketing in a Digital World with Aric Rindfleisch, one of the many courses available from GlobalLinker affiliate partner, Coursera, customers are now intensely involved in almost every aspect of business, from product design to promotion and even to distribution and placement. But, surely, you might think, an SME must draw the line and retain total control over cost?
Not so fast. Emerging digital concepts and trends are pulling customers into this process as well. And, while it can be scary to think about giving up some control over this critical aspect of your enterprise, firms should at least weigh all their options to arrive upon a strategy that will ultimately work best for them.
Start by asking yourself the questions that the Coursera course poses to its students: “Is your pricing model one of your core competencies? And does it provide you with a competitive advantage? If your answer to these questions is ‘no,’ then it may be time to rethink the way you look at pricing.”
As the course explains in much greater detail, pricing strategy is driven by several considerations, including how much a product costs to produce, what people are willing to pay and, finally, what your competitors are charging.
Price Comparison Tools – Pros and Cons
In the traditional retail model, customers didn’t typically know exactly how much a product cost until they encountered the item, in person, on the shelves at a physical retail location. And, at that point, with some exceptions, there was not very much a customer could do to change that price.
These days, however, due to the wealth of information available online—including in many dedicated pricing websites or apps—customers know not only exactly how much a product costs in your store, but in many stores, both physical and online. With customers now routinely pulling out smart phones to show sales managers that a competitor is offering the same product at a lower price, several retailers have even adopted formal price-matching policies.
However, price comparison tools are not always beneficial, even for the customer. Errors are not uncommon and focusing solely on price can overshadow other product features that might ultimately benefit the customer even more than getting a “good deal.”
Marketing in a Digital World suggests ways that SMEs can avoid getting caught in the occasionally careless churn of these price comparison tools, by making quick comparisons of their products more difficult. For example, an SME might offer unique or “private label” goods, or shopping experiences that cannot be easily replicated. These methods can help your potential customers slow down and evaluate all aspects of your product, beyond merely the price.
Customers Demanding “Pay What We Want” Pricing? Don’t Panic!
Instead of picking one price and sticking to it, consider keeping your pricing strategy somewhat fluid, varying it according to several factors, including the value your product or service provides to specific customers in a specific context. As the Coursera course explains, this technique is known as “price segmentation.”
In fact, one developing trend is even to allow customers to “segment themselves,” by setting their own price, in a process known as “Pay What You Want” (PWYW) pricing, something many industries are adopting.
While this concept might seem the scariest of all, to an SME wary of relinquishing control over its cash, Marketing in a Digital World offers assurances and several recommended parameters for firms to consider.
For example, even under a PWYW scheme, firms are free to set a “suggested” price, which studies indicate that most customers tend to pay or at least get close to, due to our human natures as “social beings governed by norms of honesty and fairness.”
Offering PWYW pricing for a limited duration, and taking other creative and protective steps the course recommends, allows SMEs to experiment with this pricing model, potentially gaining some valuable PR “buzz” in the process, without giving up control entirely.
In closing, there is no “one size fits all” strategy when it comes to pricing your product. However, staying abreast of developing business trends in this area, and availing yourself of the most current learnings, will place you in a better position to compete in the marketplace.
Learn more about these topics by registering for the Marketing in a Digital World course HERE.
Posted byGlobalLinker Staff
We are a team of experienced industry professionals committed to sharing our knowledge and skills with small & medium enterprises.
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