Pricing is always an important consideration in business, especially in an environment of cut-throat competition, when we think that the market is saturated and that customers look for nothing else but price. But are we sure that this is the reality?
When pricing a product or a service, every business seeks to make a profit. Very commonly, businesses take a financial approach towards pricing by establishing the cost of the product or service and adding a mark up. With this approach, when the product or service is exposed to the general market, most businesses put themselves at the mercy of how clients and consumers react to determine success or failure. Taking a different approach can give businesses some control over driving success by knowing and understanding the market they are in and the segments to which the products and services are targeted to. This is the move from a selling approach to a marketing approach. Most products which are successful and which make an impact on the market are demand-driven, and what creates the demand is the value which consumers give to the products and service they choose to buy and make use of.
So, the next question is how to determine the value which customers give or perceive towards what businesses are offering. A good part of the answer lies in the quality and how much businesses believe that the product is of value to customers. Another part of the answer is the relationship that is built with the customer, and this is the context in which ‘the customer is king’ and that ‘the customer is always right’. The customer decides whether to buy products, what services to make use of and what value they give towards having them. Businesses which take pride in satisfying customers and work on customer engagement create value towards what they do.
For example, when do participants give value to paying a price for attending a conference other than attending one of many other opportunities which are free? Some answers lie in when participants feel that they will learn something, get first hand insight into new concepts and trends from high-profile speakers or get motivation from an energizing keynote/s and enjoy good networking opportunities. Even if participants may not always pay from their own pocket, employers may see some of these as opportunities for training and developing their teams. Companies can also see good quality events as opportunities for sponsorship, creating a win-win situation both for them and the event organizers. Knowing the organisers and the passion they have towards what they do is also an element which creates engagement and a good relationship with the customer.
Another outward approach which organisations can consider before pricing their products or services is, rather than just identifying their competitive advantage, focusing on the advantages which they can give customers. An example is that a restaurant offering a warm, friendly ambience and easy parking facilities can develop a gourmet menu for which patrons would be willing to pay because they give value to the quality food and the other advantages they are offered by going there. Also, customers give value and hence are willing to pay a premium, when there is compatibility between the image that the product has on the market, with the lifestyle of the user.