Many people approach how much they should charge for their products or services by typically asking questions such as the following:

• What are other businesses in the market charging for a similar proposition?
• How much does it cost to create & deliver the products/ services?
• What profit margin do I require?
• What is the supply of the product/ service to its demand for it?

These are good questions to ask. However, when pricing is looked at this way, it is from the business’s perspective and not the customers’ perspectives.

In my opinion there are advantages to viewing pricing from the customers’ perspective. It gives businesses insight into how they are positioned in the marketplace, where there are opportunities to sell more, and what potential collaborations or partnerships may be useful. Fundamentally, it gives businesses insights into customers & buying behaviours.

So, let’s look at pricing through a different lens…

Learning about the customer

I am a great believer that the whole point of business is to provide something of benefit to individuals or populations. Therefore, every aspect of how business is conducted needs to facilitate opportunities for this benefit… and pricing can be one of a business’s greatest opportunities.

It is often said that pricing should reflect the perceived value of the products or services provided. What one person values highly may have very little value to others. For example, the person who values expensive cars may also value other material expressions of wealth. The person who values their nutrition, may pay more for organic produce and invest in supplements, than someone whom at the other end of the spectrum pays for multiple take-aways each week and mindlessly consumes sweets.

So, pricing can help determine what an individual or specific demographic values the most at a specific period. This helps create a customer avatar, that in turn, can be used to build client-engagement strategies, identify external partnerships, and develop associated products and services that customers value further and are likely to fulfil their desires. Win-win is facilitated by putting even more focus on the customer to provide more tailored services.  

Extra-ordinary pricing

In an earlier blog post, it was mentioned that people are creatures of habit. Behaviour is a rhythm of life just like, a heartbeat or a brain wave, it has its own cadence and predictability. Put an individual under stress, who is not trained to deal with it, and observe how their reaction pulls them out of sync just like the heartbeat of an unfit person asked to run for a bus. In saying that, Elon & Justine Musk once said entrepreneurs must “learn how to handle a level of stress that will break most people”.

Bringing this back to pricing, if a person is going through a momentous life event, their typical buying behaviours are likely to also be affected, and the more they will engage with prices that are outside their typical range. For example, if a person is to buy jewellery for their partner, they may typically buy something within a specific price range. However, if this is to mark a significant event in their life such as an engagement, the intrinsic value they will attribute the jewellery, and the event, will be reflected in an increase in the price they pay. The same could be said for going out for dinner, or for a crucial medical decision, etc.

Don’t Take it Personally

It is also worth saying this… The price of your services does not reflect your value. As entrepreneurs who develop products and services, we can put a lot of time and energy into what is produced. None of this is likely to be considered by the customer. What matters is their experience. If customers are not willing to pay above a certain price for something, this is positive feedback about how they value something, not you. Entrepreneurs should take their ego out of it… (this is something I had to learn the hard way years ago!)

The Lesson

So, what’s the lesson… pricing can be used to help businesses understand more about who their customers are and their buying behaviours. When working with businesses who want to review their pricing, I will often start with an analysis of their current customer database and ask them to segment it using price as one of the variables. When they do this, a few questions can be asked:

• If there were multiple prices offered, how many customers bought in each price bracket?
• Which price bracket bought faster and more often?
• Why did this happen?
• What does each price bracket tell you about how you are positioned in the mind of the customer?
• What happens if you change your pricing?
• Could you have a product or service reflective of something outside the customers’ typical buying-patterns that they can access one-off?

If you would like to have a conversation about pricing, feel free to get in touch using chris.robertson@sgfe.co.uk. Pricing is a conversation that entire books can be written on. It is my hope that this blog has simply been, food for thought.