Paul Hassing was today agonising over pricing – one of the most important decisions a business must make. He gives some simple, real life situations and then asks some very simple, yet thought provoking questions.
I’ve commented, and some of the other comments are interesting also.
I have often been surprised at the haphazard manner in which many small businesses treat their pricing. Often there is little or no research, it is reactive, and there is rarely a plan. Without a plan the pricing decision is a one-off event rather than a process, and this means it will always be reactive.
Pricing is often considered part of the “marketing mix“, and this makes sense. But having a plan for developing your pricing can greatly help in the financial management side of your business also. In a very basic sense, a pricing plan answers questions like “What is the price now, and where do I want it to be?”, “Why is the price what it is now?”, and “What do I have to do to increase/decrease my pricing?”. Of course, you’ll also want to try to determine how your clients will react, and what they will expect as a result of any change.
By having a plan, you can do things like developing strategies to tie in customers payment performance. This would seek to improve profitability and also cash-flow. Of course, this needs input from both the marketing and financial types in your business.
This is all kind of obvious when you think about it, but without a plan to develop all aspects of your business, including pricing, you’re always going to be reacting to what other people – clients, competitors etc – are doing, rather than getting to where you need to be.
So, have you got a Plan?