A question that comes up a lot in marketing consultation – although everyone words it a little differently – is, “If we’re not making enough money from our marketing program, how can we afford to pay someone to help us?” To which our standard response is, “How can you afford not to?”
Really, it’s simply a matter of business logic. Are you better off investing now to plug the holes and get your marketing department ship-shape, or saving that money and using it to keep rowing your sinking boat?
A perfect example that proves the value of investing in needed consultation is the area of pricing strategy.
Legacy B2B companies who have been in business for decades are especially guilty of this, but really any organization can run into this challenge if they’re not careful. It’s easy to be drawn into an ongoing price war with the competition until profit margins are shaved so thin, they’re hard to even see. But this is a losing battle for everyone involved.
Rather than getting caught up in that disaster, here are four ways to approach pricing more strategically, (a subject we often cover in depth with our consulting clients).
1. Eliminate the All-You-Can-Eat Buffet Mentality
Can you imagine going to an all-you-can-eat buffet expecting the beef they serve to be the same cut and quality as the $29 Filet Mignon you could buy at the high-end steakhouse down the street? No. You come to a buffet for selection and volume, not for the very best money can buy.
If your customers tend to view your entire product offering as one long smorgasbord of options with no clear delineation or differentiation, it’s going to be difficult if not impossible for them to understand why your products are worth more than your competitor’s. They can’t really even tell why one of your products is better than another for their unique needs.
Instead, are you translating your value proposition into customer specific offers? Doing so ties a particular product with a specific customer persona’s pain points, clearly identifying it as the very best option (even if it is a little more expensive than the competition’s similar offering).
2. Offer Your Customers More Choices than Discounts
When you walk up the driveway at a neighborhood yard sale, you can be pretty sure of two things: the price tags are going to be reasonably low, and everything is negotiable.
Have your customers been trained to feel the same way about your products? Are your salespeople trained to offer a discount at the drop of a hat, or are they willing and able to speak to the true value of the products they sell, rather than just haggling on price? Can they entice a hesitant buyer by offering choices in product details to better meet that unique customer’s needs?
In many ways, the value of your product is perceived based on how flexible the price is. So, while offering discounts is a sound strategy in certain circumstances, it should never be the first option in your salesperson’s mind.
3. Consider How Your Competitors Would Describe Your Pricing Strategy
Driving down prices is an inevitable result of free market competition. But that doesn’t mean you need to have your foot on the gas at all times.
Would your competitors and other industry leaders consider your company a leader or a follower when it comes to pricing? Are you simply swapping volume with your competitors, essentially driving the entire industry’s prices down? Or are you working to enhance your product’s value in the mind of the customer so price drops are more reasonable and strategic?
Just consider the single most valuable company in the world: Apple. While every smartphone and tablet maker in the world sought ways to churn out quality mobile devices for less, Apple consistently sold millions of (arguably) overpriced iPhones and iPads. Only recently have prices come down slightly on brand new Apple products, and they’re still selling huge volume on the high end of the price scale.
Apple is definitely a leader.
4. Who’s in Charge of Negotiation? Sales or Purchasing?
If your salespeople are spending a long time haggling with the customer’s purchasing department, there’s definitely something wrong.
A customer’s procurement department is always going to try to drive cost down. That is, of course, if they know they can. And they only know they can if the sales team hasn’t done a good enough job educating the customer on the value of the product.
The same principle we discussed above about selling direct to the customer applies to customer procurement as well: if price is all they can see as a differentiator, you’re going to lose.
Can You Afford Not To?
If you can realistically step back, look over your current pricing strategy, and decide none of these suggestions could help, you’re in a better position than most of your competition, guaranteed.
But if any of these four suggestions sparked an a-ha! moment for you, just imagine what a team of highly qualified marketing consultants can do for you, given an opportunity to concentrate on your unique circumstances?
If you’d like to find out, contact us and we’ll discuss it.
