Pricing Strategies for Small Business. Andrew Gregson

is no perfect market with demand perfectly balanced by supply. Even the advent of the Internet and its ability to convey detailed information to millions of customers and clients has not yet altered the supply and demand scale. So if your response to your business woes is supply and demand, then remember Alfred Marshall said that if you could teach a parrot to reply “supply and demand” to every question, you could bestow an economics degree upon it.

      Following the crowd by pricing like all the rest is a recipe for the lazy spiral of mediocrity. You can do better. You can get a better price than your competitors. But it will take some examination of your business and pricing methods.

      Estimating methods like WAG, SWAG and STICK are clumsy and unprofessional. There are better ways, with the expenditure of either time or cash, to develop methodical estimates with a relationship to cost and get the right price in minutes, not hours. And to get the right price each time in response to your customer’s needs. And be able to teach this method to staff so that someone can buy your business an expect it to make a profit.

      Driven crazy by your customer? Perhaps you are the tail wagging the dog instead of the dog wagging the tail? This is a trap where you let customers dictate the price. The business wreckers mentioned in this chapter are all too common. If you drive them out of your company they may concentrate on your competitors. However, listening to the customer can give you valuable insight into the motivations and value placed on your goods and services. But be careful and measure it. Anecdotal evidence is a business wrecker.

      And speaking of measuring, you cannot get a better baseline to see where you need to improve than buying a cost of doing business survey for your industry. Armed with these one or two pages, you can examine your business item by item and line by line to see how well you compare. Better than average? Good. Keep up the good work. But never settle for mediocrity. Below average? What can you do to improve?

      This chapter was about exploding the complacent attitudes about pricing and estimating that build and maintain mediocre businesses. These businesses consistently underperform, and at the same time cause stress for the owners. The pricing methods described here disguise the fact that the business has not clearly thought through its position in the marketplace; how the business can get top dollar for its services; and how to communicate this value-for-money argument to the customer. The next chapter describes this process.

1.Watts, Michael. The Literary Book of Economics. Intercollegiate Studies Institute. Wilmington, DE. 2004

2.“Economics Focus: To do with the price of fish.” Economist Magazine. May 12, 2007, p. 84.

3.Walt Stoeppelwerth, Estimator Books and Software, www.hometechonline.com.

4.Nagle, Thomas T., Hogan, John, Strategy and Tactics of Pricing: Guide to Grow More Profitably, 4th edition, 2006. Reprinted by permission of Pearson Education Inc., Upper Saddle River, NJ

5.Henry Ford. My Life and Work (New York, Doubleday, Page & Company, 1923. Quoted by Theodore Leavitt in “Marketing Myopia,” Harvard Business Review No. 75507. September-October 1975).

6.Statistics Canada released a study in 1997 that showed 25 percent of inventory shrinkage was due to theft, 25 percent was due to clerical errors, and the final 25 percent was due to vendor fraud.

7.Winkler, John. Pricing for Results. ©1984 by Facts on File Publications, Inc., Imprint of Infobase Publishing. Reprinted with permission of the publisher..