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Best Price – really?

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There are businesses that have made a fortune piling high and selling cheap. When I first started working with New Look that was very much their strategy and may still be – it’s been some time …

However, there are significantly more that have failed with this pricing strategy, including my own.  The volume v. break-even is the key factor for this business model.  Would you know what this is for your business?

Unless you’re a very fortunate exception, and have a significant cost advantage that is virtually impossible for your competitors to match, it is wise to resist competing solely on price.

You may think that if you do increase your price you will lose ALL your client base – whilst this is unlikely, here are nine other strategies … that increase income without increasing your price.

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1. Decrease the level of discounts you currently offer customers.

2. Increase your minimum order volumes so that customers have to reach a higher threshold before they qualify for discounts.

3. Increase your delivery charges and charge for any additional special services related to delivery.

4. Charging your customers for any supplementary or installation services that were previously included as standard.

5. Raise prices to cover for overtime or additional time needed to deliver rushed or very short notice orders.

6. Have sound credit control processes and put in your terms and conditions interest charges on overdue accounts.

7. Focus on selling higher profit margin products and services, and begin to phase out/place less emphasis on lower margin items. If you are unsure of what your margins currently are, it will be a worthwhile exercise finding out.

8. Check out and review the penalty clauses in all of your contracts. No doubt your suppliers will be imposing tighter terms and conditions on you, so it may be an idea to consider a more commercially aggressive approach.

9.  Decrease some of the ‘fluffy’ characteristics of your product or service, whilst maintaining current prices.

There is nothing wrong with a penetration pricing campaign, which means selling at a lower price in order to penetrate the market place to generate sales and/or a reputation.  In most businesses this needs to be part of a bigger picture of engagement followed by an up-selling strategy. Question is …  Have you thought through how you up-sell? 

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2 Comments »

  1. This is all ‘fingers on the pulse’ stuff Laura – spot on.
    It can often feel like you’re a ‘market trader’, and so finding solutions to differentials is a constant challenge, as is keeping an eye on margins etc.
    Not sure I entirely agree with your argument for ‘phasing out lower margin items’ – I see it as a sprat to catch a mackerel , and have a plan in place to maintain existing ‘low margin’ business – but to develop/expand the higher end sector.

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  2. That sounds like a perfect example of a penetration pricing strategy. Loss leaders and low margin products are always acceptable if they are part of a wider marketing plan. There are many business that have made a fortune purely on the back of cheap and cheerful – Poundland for example. Thanks for pointing that out Richard.

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