Pricing’s 5 Biggest Challenges (and 13 Tips to Handle Them)
Defined by Merriam-Webster as the quantity of one thing that’s exchanged or demanded for another, pricing has a direct impact on your business’s ability to make money and succeed.
Pricing’s 5 Biggest Challenges
Here are pricing’s five biggest challenges and thirteen tactics to help handle them. While many of these examples are B2C, the same principles hold for B2B and solopreneur pricing.
1. Businesses have a fear of setting the wrong price. Businesses face the challenge of either pricing a product too high so that customers don’t buy it because it’s out of their price range, or too low so that they lose money by not covering costs or customers don’t purchase because it’s perceived to be cheap. In either case, the marketer has a potential opportunity loss. Actionable Marketing Tactics:
- Assess your competitors’ pricing. Analyze what other businesses are offering for the same price.
- Consider how you are positioned in the market. Your prospects’ perceptions of your offering have an impact on what customers will pay. Understand that this involves your positioning and related marketing as well.
2. Margins are squeezed. Given the increased information customers have via a variety of comparison websites, social media and mobile, there’s greater price transparency. For customers it’s all about the price. This has been particularly apparent in the airline business where travel sites make it easy to book your flight based on price and personal tradeoffs (such as number of stops). Take some lessons from the airlines. Actionable Marketing Tactics:
- Create alternative revenue streams. Assess where you can add other products or services. For example, airlines now charge for meals on flights.
- Change your business model. As a business, you must examine your costs. If your cost structure requires a certain level of revenue, where else can you get sales? For example, airlines fly less flights with more seats and fill more of the seats. Also, they charge for bringing bags with you.
3. Mobile invites your competitors into your store. With increased smartphone and tablet usage, consumers in your retail establishment can compare prices with just a few keystrokes. At a minimum, you’re competing with Amazon and eBay. Additionally, a proportion of prospects go to your store only to see what the product looks like in real life, a practice known as showrooming. This activity provides shoppers with the ability to choose the lowest price and order instantly from another retailer. (To help you, here are 69 mobile research facts explained.) Actionable Marketing Tactics:
- Empower store employees to offer better pricing. You must clearly set guildelines about how discounted prices are handled and the type of documentation needed. Also, it’s a good idea to only allow more senior personnel to do this.
- Enhance your promotional offer to make your product more competitive. An alternative is to provide different promotions to effectively lower your price for customers without actually changing your price. For example, give shoppers an incentive for purchasing such as buy one at full price, get the second one 50% off.
4. Location is no longer a consideration (for most products). Unless you’ve got perishable products or need to be able to visit the user of your services (or have them visit you) such as a plumber, prospects can choose suppliers anywhere. Of course, this also provides business opportunities. Actionable Marketing Tactics:
- Expand your offering geographically. You can offer your products and services to a broader audience since location’s no longer a constraint.
- Use your retail establishments differently. Make your stores more than just a product showroom. Expand your offering with live services such as training. For example, Apple Stores provide free service with their Genius Bar. (Hat tip to Eric T. at the Upper West Side Apple Store.)
- Create community. Use your retail establishment to engage with your customers IRL (in real life). Give them a place to congregate and interact around your products. For example, popular priced Lion Brand Yarn, a wholesaler, opened a studio in New York to showcase new high-end offerings, provide classes and build community. NOTE: One of the biggest issues consumers have with businesses on social media is that they don’t engage.
- Have a mobile offering including both a mobile website and a mobile app. Research shows that customers use both types of mobile content. It’s useful to promote the content.
5. Offerings are more diverse. As a result, shoppers have a broader array of product options available. Further, the addition of social media and mobile enable consumers to consider more personal choices as well as other substitute products than they did previously. Actionable Marketing Tactics:
- Choose your positioning carefully. Determine what your unique selling proposition is and how it relates to your customers.
- Select your target audience. Consider whom you want to reach and how you want to compete for customers.
- Ensure your business is visible on mobile. Make sure you’re part of the consideration set by allowing customers and their influencers to find you when they’re in shopping mode, either in a store or on their couch.
The bottom line is that social media and mobile usage are causing businesses to reconsider their pricing decisions. This holds for all types of products and services. It’s particularly difficult for physical products that aren’t distinguishable.
What other pricing issues have social media and mobile caused for you?
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