We’ve covered the tricky topic of product pricing before, but there’s so much to it – particularly when you’re a social entrepreneur attempting to create a business where society profits.
You need to profit too, and getting your pricing right is one of the key things you’ll need to focus on if you’re to maintain a healthy bottom line and make the enterprise sustainable.
Today, we’ve got three tricks that have been used by retailers and businesses in other trades for many years, and which still work wonders today when it comes to pricing your products.
1. Create value with price anchoring
Sometimes referred to as ‘Focalism’, price anchoring relies on the human tendency to act upon the first piece of information discovered (known as the anchor).
This is why we often see high ticket items advertised next to low cost products. For instance, the £1,000 ten day holiday that sits adjacent to a £3,500 weekend getaway will appear to offer more value. True or not, its mere placement is likely to force a significant number of people to make a purchasing decision.
If your social enterprise is retail-based, don’t be afraid to advertise or display the more expensive products next to those you want to shift at higher volume.
2. Weber’s law and price increases: when ‘just’ is just enough
What happens if you need to raise your prices? Will all of the goodwill you’ve built with your existing customers be demolished?
There’s no need for it to be – particularly if you use Weber’s law, which refers to the perception of change and the noticeable difference in something. When it comes to pricing, the idea is that people rarely notice or care about the difference with a price increase if it’s proportional to the original price.
Ten percent is often considered to be the magic number when it comes to product pricing and Weber’s law, therefore if you need to increase your prices by that amount, it’s unlikely you’ll lose many friends.
3. Don’t throw too many options at them
Think about the last time you found a product you wanted but ended up completely bamboozled by its pricing. There’s nothing more frustrating, and it’s almost certain that you will have either given up or headed to a different retailer.
You might have perfectly legitimate reasons for multiple pricing options (pay monthly or one-off is a great example for service-based products), but the result is usually too confusing for the potential customer.
Similarly, if you’ve got a couple of similar items that are priced the same, you’ll probably find that people will be less inclined to buy either. It can be demotivating to find multiple products with the same price and seemingly little on offer to gauge their individual value. Just a small difference in pricing is likely to force a buying decision.
Remember: you’ll never get your pricing right straight away; it’ll need tweaking, refining and market testing, but our tips above should get you off to a great start and result in a pricing strategy that neither drives customers away, nor damages the reputation of your social enterprise.