Small Business Pricing Strategy
A review of small business pricing options and their role in determining overall small business pricing.
Your small business pricing strategy is a key decision as one of the four “Ps” of the marketing mix, (Product, Pricing, Promotion and Place). It is integral because it affects other marketing mix components including, sales promotion and distribution channel decisions (Place). Therefore, your decisions regarding the pricing strategies you employ are crucial to producing a profitable bottom line.
Your small business pricing plan has positive and negative effects on your customers and affects the perceived value of your product or service. If you price your products too low, they may appear too cheap. Price too high and the perception of value may suffer, or customers may buy a better-perceived price-valve alternative from competitors.
It is usually wise to employ several pricing strategies at one time. The specific types and methods of small business pricing strategies you will need to take into account depend on the overall marketing objectives of your company. It is also important to keep in mind that a successful small business pricing approach is not conceived in a vacuum, but is formulated to be part of a profitable overall product/service mix pricing strategy.
Most pricing methods emanate from business to consumer marketing, (B2C) companies and may not be appropriate for a consultative business to business marketing, (B2B) firms . Developing your small business pricing plan and knowing which pricing methodologies to utilize may require substantial trial and error without the help of a marketing professional. How to Establish a Small Business Pricing Strategy
Pricing Strategy Questions You Need Answers To
Establishing a pricing strategy that is appropriate to your business is critical to your marketing success. Pricing affects your products or services development, channel strategy and promotional activities. In order to develop a successful pricing strategy you should take the time and effort to obtain answers to a number of key questions.
- What are the key industry markets and product or service segments for your business?
- Do we need to develop different pricing for different industry and market segments where we sell our products or services?
- How do we define the short and long-term objectives of our pricing strategy?
- Do we know the price elasticity for product or service?
- Do volume levels affect our cost structure and what pricing adjustments may be required?
- Is there an opportunity to bundle products and services and if so should this be done and how should bundling be executed?
- What does our discount pricing structure need to be through various markets and channels?
- In what ways do we expect competition to react to our pricing?
In getting answers to these questions objective research and analysis are paramount. Relying on suggested pricing from your suppliers or sales organization is neither objective or been subjected to analysis that is specific to your business. While these types of pricing inputs are good starting points for data collection, they are far from sufficient to make crucial pricing decisions.
How to Establish Your Small Business Pricing
- Consider working with a professional marketer
- Do your homework and gather competitor pricing from the marketplace
- Do not call your competitors for their prices - this is illegal in the US
- Make careful decisions on the pricing strategy and methods best suited for your B2B marketing efforts
There are three major types of pricing strategies used by most businesses usually in combination. There are also many types of subset strategies within each of the major categories of pricing strategy. Because there are so many options, it is wise to do your homework before jumping to any conclusion on just what your pricing strategy, should be for your small business. The key factors that impact the appropriate pricing strategy are:
- Market Segment
- Marketing Objectives
- Distribution Channels
- Customer Base
- Competitive Situation
All these play a vital role in deciding your small business pricing objectives strategy. To get started the following links will discuss and overview the major pricing strategies for your consideration in establishing your pricing strategy.
Small Business Pricing Standard Pricing Methodologies
Small Business Promotional Pricing & Discount Pricing
Your Bottom Line
A thorough analysis of your pricing strategy could unlock a new ability for to grow your sales. For more information on a small business pricing strategy analysis for your business, contact us now at 866-875-2534 or order a small business pricing strategy analysis now.