You have to ensure that you “position” your products and services correctly in the minds of the people in your market place. Prices are crucial to this perception and your market positioning. Having the right products to solve your customers’ problems is only half the journey. Let’s now look at how your prices can influence the other half.
Before we begin, if you need a recap, this is what we’ve talked about so far. Do click on the links to each conversation:
- Conversation #1: What your clients’ problems are
- Conversation #2: Whose problems you’re solving
- Conversation #3: What products you offer them to solve
You should now have a really good understanding of whose problems you are solving (your segments), what their problems are, and what products you offer to help people in your segments solve these problems. Let’s begin.
Conversation #4. Market positioning – what do your prices say?
First, what do you want your ideal client to be thinking about you?
People need mental shortcuts to help them “file” your business in the right drawer in their brain. You have to be very clear about which “drawer” you want to be filed in. Is it the “cheap and cheerful” drawer? Or is it the “expensive and luxurious” drawer or perhaps the “great value for money” drawer?
Let me help you gain some clarity around how you want your market place to “file” you.
- How do you want your current customers to describe your business when it comes to price?
- How do you want prospective customers to describe your business when it comes to price?
- How do you want influential people in your market place to describe your business when it comes to price?
- How do you want to be speaking about your prices?
Hopefully, there is some consistency in your answers.
Let’s go back to our IT Training Company example.
Their words might be: “We want people to say that we are a worthwhile investment”.
What this tells me is:
- they do not want to be the cheapest in their market place
- they don’t want to be thought of as a quick-fix solution
- they know that their clients have to consider their products before they purchase them.
So, how does this translate to prices and positioning?
It means that, when we look at their prices against what is on offer in the market place, their pricing has to reflect how they want to be thought of.
Their pricing has to be:
- not too cheap or they’ll be perceived as a quick-fix, diet-pill solution
- not so expensive that ultimately clients think, “was that worth it? I’m not so sure, we’ll have to really crunch the numbers to figure it out”
- expensive enough that people pause before buying and really understand what they are getting.
To summarise, they are looking for a pricing point that tells their market place they are a “worthwhile investment”.
Now let’s talk about your organisation and its pricing and what it’s saying to your market place.
Have you fallen in to the common trap and priced low to win business? Do you offer discounts?
The biggest problem in pricing low is that your market, whatever they might say, might perceive cheap as being low quality. And if you offer discounts even on an, “Please don’t tell others” basis, psychologically you are admitting that your product isn’t worth the price tag; and it then makes it harder to sell at full price (especially as you know, and other people will to, that you discount).
Or have you priced too high for your market’s perception of your product?
This is a tricky one but it is when you have chosen your price point but the rest of your marketing mix doesn’t match it. So, you have a premium price for a Michelin starred restaurant but your food is good not amazing, your decor clean but not cutting edge, your service friendly but not top-notch.
Your prices have to reflect the reality of what your market place are experiencing of your organisation; too low is bad as is too high.
So, where do we go from here?
If you know how you want your market place to describe your pricing and you are confident that your products and experience match that, then choose the price that creates the positioning you need. Pricing is a key indicator in positioning your products or services in your customers’ minds. So choose where you want to be, set your price and stick to it.
Then, read these two blogs and make sure that your price is actually going to deliver you a profit and the money your organisation needs:
- How to set your prices effectively: part 1 costs
- How to set your prices effectively: part 2 pricing strategy
Finally, some reassurance…
I often work with organisations whose pricing is too low. I have, again and again, advised (sceptical and worried) business directors to put their prices up. And do you know what? It’s okay. They still have happy customers who are willing to pay that price. Why? Because these organisations put their prices up hand in hand with ensuring that they proved they offered value for money.
In our next, and last conversation of this series, we’re going to continue our journey of looking at how your market place perceives your organisation and discuss branding (spolier: it’s more than just logos and colours).
I look forward to it.
Kara Stanford is a Strategic Marketing Consultant who helps businesses review and plan their marketing so that they can achieve long term sustainable growth.