Ways Pricing Can Affect Business

How to Price Effectively

When it comes to pricing, most self starters or startup companies shoot from the hip. There is very little thought going into the price. They see something similar to what they sell and use that price as the standard, and that’s it.

The good thing about approaching prices that way, is it helps get things moving right away. The bad thing about that approach is it makes you look and feel like everything else at that price point. What makes your product/service different?

To effectively price, there are important things that need to be considered:

Who are the buyers?
What do they need?
How often do they need it?
How often can you supply it?
How fast can you supply it?

Without answering these questions, the problems of pricing incorrectly will hurt your profits and ultimately your business.

Cheaper Isn’t Always Better

One way to compete for business is being the lowest price available. A lot of shoppers look for the cheapest price, and make decisions based on how much things cost.

A low price does one of two things:

Makes purchasing decisions easy
Throws quality out the window

The best quality product is usually placed at the top of the price scale. Have you ever been inside a luxury brand store and said to yourself, “Wow! That’s the same thing I saw at Walmart, but their price was cheaper?” Chances are you saw something similar, but the quality of the product is much lower.

I’m not saying everything you find in a luxury store has better quality, but you’ll be hard pressed to find something with the same quality or better at a cheaper price. When you see a low price, be cautious about buying until you understand what the product or service is all about.

Pricing Variances

Similar and the same. These are the areas that kill business. When it comes to products and services, people want to be able to choose. It gives them the ability to change their mind and customize their approach to purchase within their budget. Variances change their experience.

Variance, or in other words variety makes things better. It doesn’t have to be so different, but colors matter more for products. Think of your pet’s collar, why did you choose it? Was it because it was the best brand or was it because of your favorite color? This is why variety is so important.

Other things that help in variances are bundles. If you’re an avid shopper, you’ll be looking for the best deals. Deals often offer more things at once by bundling products and services. These are often called packages or plans. Many businesses will refer to these in their own unique terms.

Price is Not Everything

That’s insane, right? You can reason out why prices are very important, but the fact is that the perceived value is more important. When you bundle, you increase value. Most people are likely to purchase a bundle over a singular item, because through perceived value, they save money. Makes sense, right?

Let’s put this into perspective. Restaurants for example have a very low margin for error. A sit down restaurant will often price things a la carte or pay for each item, while a fast food chain will price similar things in a bundle, labeled as a meal. The sit down restaurant might have better quality, but the fast food is made more affordable through bundles and the buying process is much easier, making things go faster.

Branding also plays into the restaurant scene. When you’re not easily identifiable, it’s hard to attract customers, because they’re not familiar with what is represented. Marketing through advertising usually closes that gap, but can cost a lot if not done correctly. Competing with that business model is very difficult. That’s why so many sit down restaurants often close doors shortly after opening.

Now, let’s look at hotels. A 2-star hotel will price their rooms lower to attract more customers who are looking for a bargain. The reason why it’s a 2-star hotel is because it lacks quality. The room might not be as well kept, making the experience not so great. They might book fully more days per week, but the returning guest list is very poor.

A 5-star hotel will price their rooms very high to attract customers who want a comfortable stay. The reason why they can price higher is because they offer more amenities and the quality of the stay far exceeds that of a 2-star hotel. They might not book full on one or two days a week, but they’ve earned return quests.

The Bottom Line

What is the point to pricing? You can take all the pricing information and strategies out there and use it for your business, but the fact is quality and customer satisfaction always trumps price.

So, if you’re considering on starting a business or searching for a new business that can serve your needs, you should really consider the quality and customer experience they provide all around their pricing. Odds are that you’ll find better quality and experience with a higher price.

Yes, that’s not always the case. Remember earlier when I mentioned startups shooting from the hip about pricing? That’s where you can find out if they’re the real deal or not. Always compare two or more prices to the quality you will get or seek.

Our services are not priced as high as what you’d expect from a pet hotel, but their quality and customer experience cannot be matched to our prices. We treat every pet under our care like they’re our own. If that’s not what you’re looking for, happy hunting.