When Economies Get Tough, The Tough Get Pricing

I always say that pricing is one of the step-children in the marketing mix.  People always focus on products or promotions.  No one really puts any attention on the two ingredients of the marketing mix that will actually yield bottom-line results; pricing and distribution (place).

Since we are still in first quarter, it’s not a bad idea to review your pricing strategies.  If you really want to pull in some cash, look at your distribution channels at the same time and see how you can use the two to make a mint.

4 Basic Pricing Strategies to Get you Through Tough Times

No on says it better than Rafi at Pricing for Profit.  In this article he gives the following 4 strategies:

1. Give Rebates. I’m not a huge fan of m,ail-in rebates myself.  I much prefer to use at the check-out or a coupon or something.  Rafi makes the valid point to NOT CHANGE your price, but to give a temporary discount as a promotion, rather than a yield to the market.
2. More for the Money.  Sell more quantities at the same price level.  So if you’re selling 3 for a dollar, make it 4 for a dollar.  Perhaps you can add another valuable service component.  Again the message is to NOT CHANGE THE BASE PRICE.
3. Offer versions.  I’m not advocating complexity here.  I’m advocating pairing down your offer.  Eliminate some nice-to have features and lower the price.
4. Introduce a new Pricing Model.  I really like this idea.  Tough times require desperate measures and necessity is the mother of invention and that’s a great time to introduce something interesting.  In my local paper I noticed a guy offering a reduced price for air conditioning maintenance.  Not creative until you realize that he was doing this in Cleveland in January and February.  Good thinking.  How about a "product or service of the month" concept?  Get creative and get started.

BEWARE: Do not do this UNTIL you’ve done the following:

Create an a la carte list of your products and services.  Here’s how:

1. List absolutely every little thing you offer your customers.  This includes actual products you sell and service things you do.  I mean every little detail.  Phone calls count, e-mail support, on-site visits, each product un-bundled. 
2. Next put a "list price" on that offer.  Make this a price that is high enough so that you will never feel tempted to lower it.  If you were to get that price, it would put a smile on your face.  Even a 30% reduction of that price would put a smile on your face. 
3. Before you do anything else – take a moment to test that price against what it COSTS you to do this thing.  For example, you need to know what your hour is WORTH.  If my hour is worth $75, then I might charge $100 per hour to talk to you on the phone – or get into an e-mail exchange.  Don’t just throw prices out there – be sure they cover your costs.
4. Calculate what each customer purchase is worth to you.
5. Now you’re ready to create profitable offers.  Combine things on your list.  Give customers the option to create their own custom offering.

Let me know how you’re doing.