Confused about your pricing? Worried that pricing might involve hiring an expensive consultant? Before you drive yourself mad with conceptual theories and investing in conjoint analysis software, here are eight practical ways you can help give your pricing a little more focus:

1. Collect competitor information on pricing BUT don’t be bound by the price neighbourhood. Remember, their prices are not prices designed to help your business. A price neighbourhood policy does nothing to help price to value and can commoditise your brand.

2. Design a pricing matrix which rewards volume. The more people order, the cheaper it gets. This is not altruism, this is a fact of nature and cannot be overcome by meanness. I heard of one company recently which offered 1 free product for every 12 ordered. If a customer bought 144 units, they got 12 free. In other words, beyond 12, there is no scale of discounting or saving.

3. Make sure any offer you provide is conditional on a response by the customer. Never simply cut costs to get sales – you only encourage customers to think you will always be flexible. This applies to offers via your sales team, on any sales letter or brochure, or online on your website.

4. Your cost base is of no interest to your customer – avoid cost-plus pricing as it is artificial and does not respect the real value of your product to the customer.

5. Never launch a new product cheaply. It is always easier to come down in price later than start putting prices up. The world-famous mini car made no profits in its first years because the company failed to understand the real value of a tiny car – economy, funkiness, space, utility – and failed to price for that value in its marketing.

6. Make sure your sales and marketing people know WHY your product is valuable and give them a pricing structure based on the company’s needs and not on the needs of the sales team to close a deal. Employing a good copywriter who understands value-based copywriting techniques is a recommended way to create a real understanding of your brand.

7. Remember to include pricing promotions in your budget at the beginning of the year. It is crucial you anticipate revenue based on prices charged rather than a multiple of full price x units sold

8. Understand the 80:20 rule and avoid pricing gimmicks designed to attract unprofitable customers.

If you only remember one thing, remember that low prices serve to cripple businesses by piling pressure on internal overheads. Price to value and communicate your value to ensure consistent and profitable pricing.

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