Marketing Strategy: Give Money. Keep Profit.
Oil prices set record highs this week and many analysts see this trend continuing, with gas prices breaking $4 a gallon and higher — and permanently staying there. This type of impact on the cost of energy could mean a permanent change in spending patterns for your customers and consumers. All but the most wealthy will be cutting back in other areas as transportation costs continue to increase.
The kneejerk reaction for customers is to look for cheaper pricees on products and services. As marketers, our first reaction may be to try and give that to them directly by lowering prices. This, however, may not be the best long-term approach. If a competitor undercuts you, your customer are likely to follow the lowest price. Or, expect the same low price repeatedly from you. If your company loses money on that price, you’ve backed yourself into a no-win corner: participate in an unprofitable price war or lose the customer.
What do you do instead to please customers, keep their business, and still make a profit? My local grocery store has a unique solution: they are giving away money. No, they aren’t handing out dollars at the door, but it’s close. When customers buy up to $1,200 in store gift cards, they get an added 10% bonus in additional gift cards. Everybody wins. Customers HAVE to buy groceries, so these gift cards are the next best thing to free money. The store is assured their customers will not go elsewhere next time to shop. Plus, the store gets a bit of a boost in cash flow because customers are essentially pre-paying for groceries.
The next time you sit down to think about ways to keep customers in an inflationary economy, consider ways to increase value without playing the “lowest price” game. BTW, for a refresher on different pricing strategies, take a look at these articles on pricing strategies:
Making Sure the Price is Right
7 Pricing Strategies that Improve Profit
Small Business Pricing Strategies
2 Responses to “Marketing Strategy: Give Money. Keep Profit.”
Offering very low prices is certainly a Grey area. To some extent lower prices are important. But in a field such as technology I think quality has a major role to play. It is not quality of the actual products i.e. software or website which are directly measurable as the client will find the software easy to use or the design appealing. The second major factor that you can use effectively to justify a higher price for your service is the quality of service and after sales support. Often companies commission web design businesses for a particular project as opposed to an independent freelancer because they are looking for accountability. THey are looking for a process that can exist beyond one individual.
As such it is vital not to under price your product or service. I have found on a number of occasions that when I charge too little for a project the client does not appreciate the efforts involved whereas for some reason when they pay more they too value the service and the business providing it more
Great points! I’m in definite agreement about not underpricing. Informed customers are able to understand that for any service, higher price should mean higher level of expertise and fewer problems.
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