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Sunday, 8 January 2017

Setting Your Pricing Structure? Try Good, Fast or Cheap!

One (only one?) of the issues in the life of the person in sales is trying to disabuse the customers that they are always right whatever the old saying says.

In the main we should and often do try our utmost to provide the service and quality standard that will truly satisfy the customer.  

Then again, should our ultimate aim merely be to generate satisfaction?  We are constantly exhorted to delight the customer whatever that might mean.  

Frankly I can’t recall being delighted by some purchase recently.  Pleased, yes, at some unusual level of service like something arriving on Sunday after having placed an online order the night before but delighted?

The problem for everyone in sales is the setting of precedents.  Give exceptional service on one occasion and it can then be considered to be the norm which is not to say don’t attempt it.

Setting expectations is a tricky business and customers like you and me can be very fickle.   Unless you have a brand that is unique or at least rare then your competitors can have a field day at your expense.

Please note this is not a plea for lower prices.  It is easy to claim that if we lower our prices we will generate more business.

Just consider the following scenario.

We have a product that we buy or make for £10 and which sells for £15 thus showing a margin of £5.  The salesman then suggests to the sales manager that if we discount the price by 10% we will sell lots more.

Instead of making £5 per item we now male £3.50 so in order to make the same overall profit we will need to sell 41% more products.   Please note that will only take us back to where we were anyway and is it likely?

Price is an emotive subject and especially it seems so to radio interviewers who persist in defining “competitive” as defining the lowest price.

We buy things in a far more sophisticated way than that.  We consider will it be fit for purpose, what it looks like, will we be able to operate it, will it fit in the decor and a thousand and one other considerations.

Eventually we ask “how much” and that is provided everything else is right.

Of course the price does matter but other considerations can reduce its significance. I have more than one member of my Vistage CEO peer group who is proud to say that their products/services are at the higher end of the price range simply because their level of overall excellence is high.

There is a great little test that has become popular and encapsulates these thoughts.

It is the Good, Fast, Cheap test that says that the customer can choose but can only have two of them.

For example, if you want it Good and Fast then it won't be Cheap
If you want it to be Good and Cheap then it won’t be Fast, and
if you want it Fast and Cheap then it won't be Good.

Most businesses offer only two anyway having settled on a style and culture that suits them but a start-up could be seduced by the thought that discounts or generally low prices mean lots of lovely business.

Maybe it will but the idea is to generate profitable business and a low price culture has to be handled with great care if it is to be successful.

The trick is to settle the style and stay with it. Change is always feasible but the Good, Fast and not Cheap is the best option every time.  It implies great quality products and excellent service for which the customer should accept higher prices.

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1 comment:

Cybron said...

Nice article but little more info would be great
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