It's extremely rare for a company to be able to please all of their customers all of the time, however good they think they and their products are - and when it comes to pricing there are times when you are inevitably going to have to raise your prices, which probably won't be universally popular, either with your customers or even internally within your organisation.
Pricing can be an emotive issue and you will almost certainly encounter some resistance whatever pricing strategy you choose.
So, how do you make your pricing more attractive without resorting to discounting, which is never sustainable anyway? Here's a list of ideas you can implement to make your company more attractive with pricing.
Tell your customers what they stand to gain
If you have to increase your prices, explain the reasons for the increase and how that might benefit the customer: added content, additional service or support, for instance. It might be something new or something that you've already been doing previously to benefit your customers but haven't really emphasised the fact.
Pricing Expert Rafi Mohammed writes in an HBR Blog Network post: “Make it a point to reinforce that even with the price increase, your product or service is still a great deal. Even with a higher price, for instance, Netflix is usually cheaper and arguably a more robust service than HBO.”
Revise your price list to show value
It is in your interest to create a focus on non-pricing things because pricing is only one factor in your customers' buying decisions. Adding value makes your prices seem more attractive to a potential customer so emphasise one or more of the following:
- Quality of your products and services
- Convenience of your location for pre-purchase meetings, after-sales support, purchase of spares etc.
- Technical expertise of your staff
- How your products will ultimately save your customers time and money
- Your money-back guarantees
- Testimonials from customers
- The longevity of your product
- Special features that you can offer but not available from your competitors
- Offering special deals on replacement parts
Some customers are highly attracted by a deal’s total value and care less about the actual price. These customers are willing to pay more for the value your product and/or services provide
but the range of value you can offer depends on the markets you serve. Every value-seeking customer may want something different, so be prepared to research what it is they most value.
Re-word prices for increased perception of value
Identify all dull descriptions of price; e.g. price is £2,500. Re-word these such that the perception of value is emphasised:
"The price of these fitted kitchen units is £2,500" becomes "your investment in a fabulous new fitted kitchen is only £2,500."
Re-word prices for relativity
If your price for an item is £72.50, have your marketing department re-word all price tags, banners, brochures and catalogues such that a perception of relativity is presented. Examples might be:
- Manager's offer of the week £72.50
- Half price at £72.50
- End of season price £72.50
- Limited offer at £72.50
Set up payment options
Discover your highest-profit products and services and allow your customers to select an easy payment method on these.
The method of payment does impact enormously on customers' perception of price and whether they are attracted to buy from you. The easiest method for a high price item is to allow monthly payments over, say, three years (if this is ok with your finance guys of course!!).
Also, if customers can pay by credit card they will not have to think about making payment for probably another 4 to 6 weeks so this becomes an attractive option.
Offer prices to attract longer-term commitment
Grant Cardone, internationally renowned business and sales expert, suggests that businesses that sell on a contract basis may find it advantageous to let customers pay an existing price if they agree to a longer-term commitment.
“The only clients you need to be concerned about are those who object to the higher prices,” he says. “For example, we heard: ‘Last year I paid only $1,500 and signed for only 12 months.’ Our response? ‘Great, and that is why we are still offering that pricing to you while increasing new content and additional support. By going with the 24 months, you can maintain your old pricing.’”
Consider specific demographics
Companies, pensioners, students, high earners and different socio-economic groups each approach any purchase with a certain set of attitudes to price. Design ways for your salespeople to offer different payment methods appropriate and attractive to each group.
Some customers are more sensitive to price than others; they’re motivated by how much they pay rather than what they get out of the deal. To serve these thrifty customers, split them up by the different ways they prefer to save money.
These methods can include coupons or promotions for those who crave the reward of a one-time price concession or discounts for students seeking a reason to stay loyal to a business whilst they are on a low income.
Extremely price-sensitive customers can still be profitable. You can selectively remove value-added elements from deals these customers consider too expensive or you can add elements they value if they’re willing to pay for them.
This price customisation gives the appearance of handing power over to the customer without putting your company at risk of losing profits.
Pricing by volume
You can make your prices more attractive by offering discounts/allowances according to volume purchased, either order volume or annual volume. By separating those who make high volume purchases from those who make lower volume ones and customising your strategies accordingly, you can increase profitability for each group.
What you really want to do is encourage your customers to make one high-volume purchase per year because those who make frequent purchases may take more time and resources to serve and should therefore pay a higher price.
The low-maintenance annual purchase group could be given a discount to motivate them to come back again the next year instead of seeking alternatives for their low-effort one-time order.
This differentiated pricing for volume helps you serve customers by the volume they wish to purchase without sacrificing profitability in the process.
Always offer a "one-up" option
If you are presenting your customers with just a single option you are more or less just telling them to take it or leave it - and leaving it is not what you want. If salespeople present a "one-up" alternative sometimes the customer takes that option or makes the original purchase because they can see it is cheaper relative to the "one-up."
Your pricing team could group your most popular or most profitable items into "classes". For example:
- Gold, silver, bronze
- Large, medium, small
- Bulk, standard, light
- Luxury, regular, budget
It's all about being flexible: “No one likes being cornered with a ‘take it or leave it’ ultimatum,” Pricing Strategy Expert Rafi Mohammed writes:
“A price increase is more palatable if there is an option to save money. Even if you don’t expect anyone to take the cheaper option, offer it anyway. Consumers appreciate choices.”
Mohammed goes on to suggest that offering different classes with increased offerings to the customer may work better than offering an across-the-board price hike.
Offer customised pricing
Offering customisation by a customer’s specific buying situation can be difficult and time-consuming – and it's therefore the least utilised kind of price segmentation for B2B businesses.
It involves recognising that targeting for a specific type of customer isn’t enough; you have to consider their precise needs and state of mind at the point of every purchase they make.
For example, a customer may need a quick turnaround time, special packaging or the ability to place orders at the weekend. This extra effort on your part will mean that the price will be higher but these customers are willing to pay more for these kinds of perks; they’re also more loyal to companies willing to customise deals in their favour.
Price segmentation by stock levels
Customers are willing to pay more for a rare, high-value item and expect to pay less for something they can find practically anywhere, anytime.
To profit from this strategy, price products with high stock levels (and demand) slightly lower to make your prices attractive enough to gain a competitive advantage. For rarer products, do the opposite.
Having a rare product in stock is important for that one customer who needs it. By having it to hand, you give the product incremental value, which you can capture with an increased price.
and finally ...................
Communicate any price increases to the top
In an Inc. column, sales consultant Tom Searcy suggests that it’s important to let your biggest clients and customers know about any increase in price early on to soften the blow.
“It’s a mistake to let them get the news through an email or a salesperson,” Searcy writes. “A price increase, even if understandable, is still going to be seen as bad news - so it should be communicated executive to executive, not couriered by frontline people.”
Pricing for Profit by Peter Hill, 2013