Share your pricing strategies
In “What is elite service worth?,” FSB’s Anne Fisher offers advice to a reader who wants to know the best way to price his electric company’s top-of-the-line service—and still remain competitive.
Has your company found a smart way to price its product or service? How can entrepreneurs tell if they are charging customers too much money? Share your ideas with our entrepreneurial readers here.
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DiggContractors often furnish their employees a company van, cell phone and gas card. These same employees often use the van, cell phone and gas card for “side jobs” that generate no money for your company but plenty of overhead. I say keep the uniforms especially if you have a great logo and name that is easy to remember and instead have the employees park the company van at your lot at the end of each day or consider tracking with a GPS unit to make sure all the materials and equipment are used to produce income for your business and not for their side jobs.
I would also consider having a brochure of typical services such as running computer or low voltage wiring, inspections for real estate purchases, and maybe add alarm systems to my list of electrical services offered. You could price these services at a lower per hour cost as they do not need emergency response.
In the brochure offer the homeowner a gift certificate for dinner at a nice restaurant for any referral wrok they send you.
And the biggest way to boost sales and wow your clients is having an inside person call the next day to thank them for their business and make sure all is working well. This should be followed up with a thank you postcard ten days later, and another thank you postcard two months later.
I think there’s a bigger risk of under-charging for a service than overcharging… Ultimately you’re worth whatever someone is willing to pay for it! There’s a trade-off of course (1 customer at $50 versus 10 at $20) but the exact math is unique to a particular situation. Sometimes products sell _better_ when priced higher because of the implication they are somehow improved above the competition…
Nothing beats open discussion with customers…whether mass market research or one-on-one contract negotiation. Far better than guessing.
Pricing is one of the most overlooked and underated strategies of any business. Please check out my blog for more pricing insights: http://www.pricingforprofit.com
You know, I really resent the tone of this article and these suggestions. Dressing neatly, being on time and not gouging people are BASICS, not EXTRAS to CHARGE MORE MONEY for.
Here’s MY advice to the business that posed the question:
Do a marketing campaign to potential customers highlighting the following:
1. Tell them why you think they deserve the extras, no, forgive me, BASICS, and show how you provide them.
2. Set the bar high for quality. Setting the bar low is ALWAYS a losing proposition in the long run.
Charging too much money is a non-issue if YOU believe your price is fair and are providing a product and service on par with your pricing structure. If you feel like you are over-charging, then you most likely are. As you know, pleasing everyone is impossible; therefore some people will always go to the lowest bidder. You don’t want those customers anyway–they have no loyalty and don’t add value to your business. People ultimately buy from those whom they trust and like, making price a non-issue (within reason, of course). If your pricing causes the majority of your prospective clients to take business elsewhere, it isn’t a pricing problem, it’s a service or product problem. As I’m sure you know, selling on price puts focus on price, and that will almost always lead to trouble.
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New product introductions are perhaps the best opportunity to improve profitability. They are also an opportunity to lose big in the marketplace. The risks are high. Price too low and lose profits. Price too high and lose sales. Don’t leave your new product introductions to chance. Here are some questions to ask: • What is the price sensitivity (price vs. unit volume) of the new product?
• How should the new product be priced relative to competitors’ products?
• Will the new product cannibalize highly profitable products in your portfolio?
• What product features should be designed into the product vs. features customers don’t care about?
• What is the customers’ perception of value for the product?
• Do various industry and market segments value the product differently?
For more details on a New Product Pricing Process download the article “Engineering New Product Success; the New Product Pricing Process at Emerson Electric” as published in Industrial Marketing Management. http://priceimprove.com/articles/price.pdf