The price is right (and wrong)
Either way, Reed Holden and Mark Burton have a book that came out this year, Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table (John Wiley & Sons, 2008). Their goal? To help companies survive during hard economic times, which is good. I support that, of course. We all do. But as a consumer, I want them to leave a little money on the table, so I can grab it up. That's why I wish their advice was along the lines of, "Give everything away for a day. Your customers will appreciate your generosity so much, that you'll win over their loyalty forever." (Hey, it might work.)
But in case you're an owner of a business who is reading this, I offer you the distilled version of the book, some do's and don'ts that came straight from the authors.
When it comes to pricing, you should:
Define the value you offer to your customers. So if the coffee in your coffeehouse is shade grown (as in, trees haven't been cut down to grow more coffee beans), or if you flew out to England to buy and then sell those English muffins, your customers should know that.
Create a range of low-to-high-value offerings. In other words, "bundle your products and services -- and establish price accordingly -- which enables you to appease both cost-conscious and value-conscious customers without cutting prices."
Control company costs and reduce inefficiencies. Maybe it's time to scale back on that high-priced caterer to impress clients during meetings?
And when it comes to pricing, by all means absolutely...
Do not discount your products or services in order to compete. (See, as a consumer, I don't like that.) Holden and Burton reason that "if you get into a price war with the competitor -- without adjusting the value of the product or service -- it will just send you and your competition swirling into a downward pricing death spiral where no one wins." (Sure, we customers would win. That's why I say go for it! But as a business writer, I obviously don't endorse what my other self is saying at all. Pay no attention to him. He's off his medication.)
Don't reduce prices on your high-value products and services. Instead, focus on selling more low-value products and services.
Don't play poker with price-driven customers. The authors say that if you have cost-driven El Cheapos like my consumer self, who threaten to take their business elsewhere if prices aren't lowered, don't gamble and possibly listen to them. Either confidently stick to your guns that the price justifies the value, or let the customer take his business and badgering to your competitor instead. (Well, fine... maybe I will! I mean, they're right, of course; don't let the customer take advantage of you.)
And so you can see why I recommend this book. And why I don't.
Geoff Williams is a business journalist and the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).