Diana Ransom had a story yesterday in the Wall Street Journal on pricing in today’s economy:
The pressure to slash prices can be hard to resist. But businesses should try. Too often, dramatic price cuts lead to lower profits — and dilute a company’s brand.
But ignoring the importance of price in today’s economy also can be devastating. “Consumers are looking for value right now,” says Jeffrey Cornwall, the director of the Center for Entrepreneurship at Belmont University in Nashville, Tenn. The days are over when companies could demand premiums simply for providing stellar service and better-quality products, Mr. Cornwall says.
Ransom suggests five approaches:
1. Switch to Performance-Based Pricing — offer a lower base price and only get more if your service or product delivers as promised.
2. Offer Less-Expensive Products — add some lower priced options to your mix to keep people coming for business if their budgets are tight.
3. Use Less-Costly Materials — helps you offer lower prices, but keeping your margins in place.
4. Add Slimmed-Down Services — offer a simpler offering to customers to meet their more limited budgets
5. Offer Extra Services — stand out from competitors by offering more value for the price
I have a question. How does the impact of companies offering “green” products and society’s trend “being green” affect offering lower-cost products? I feel like more companies are offering “green” alternatives, but these always seem to be more expensive. Are consumers willing to pay more for green products after all, or are they really just concerned with the lowest price at the expense of not being “green” in this economy?
Our small start-up sells AquaNotes a waterproof notepad for showerthinkers. We recently lowered prices because our market was begging for it. Our sales quadrupled instantly. It expanded our market and other consumers began buying 2-5 items and using them as gifts.
Hey Jeff,
Your post is very interesting. The various tips given by you are very effective. I think that pricing plays a very vital role for any product or service in any situation. When the whole world is going through financial melt down, the companies must be more cautious about pricing their products.
We’ve taken a slightly different approach. We’re bundling more services together; offering more value for less overall price. So far so good. Additionally, offering custom pricing helps with our small business market.