Ensure the Price is Right for you 23 July, 2010Posted by varoom in Selling.
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In many early stage companies the price for a high value premium product is often set too low. In my meetings with Entrepreneurs a standard tip is “try raising the price and see what happens”. Later on I often see that many come back to me surprised that the customers did not query the higher price level. This is no surprise to me as many early stage companies do not realise, fully, the true value of what their product brings to the end customer.
In my blog of January 2009 I said “be careful to assess the true value, in the eyes of your customer, of your product before you set the price” this blog went into more detail about how this is done. But the reverse is true, many believe that dropping the price for a short time, to stimulate sales, would have the reverse effect. Maybe so but often all you do is devalue a premium product pricing level.
Buyers who normally favour a premium product would not respond to this pricing tactic. The best strategy for defining your pricing is to test your theories out in a controlled way with a restricted sector of your market. This way any negative reactions have a predictable impact. If you need to stimulate sales then consider offering more for the same price for a short period of time as an incentive.
The key thing in business is never make or trust assumptions, what you think is a reasonable price needs to be proven in a fact based approach. Remember you can always do special prices for individual customers, in exchange for something like earlier bookings, increased volumes or market share for a specific timeframe. As long as the customer recognises the real price level and understand the terms of the special price you can have a good chance of maintaining your premium pricing position.