But how does this impact your choice of pricing strategy as a small business owner?
According to a recent article in Money Week, brands such as Tesco and Morrison, which have been making conscious efforts to upgrade their market in recent years, are struggling to retain their growth because of the plethora of cheap brands taking up the lower end of the market.
Apparently the numbers of pound shops have trebled in the past five years with now more than 3,000 across Britain. And as consumers seem to be getting fed up with paying over the odds for cheap orange juice, they are shopping more at brands such as Aldi.
Charging over the odds for products and services certainly seems to be (fortunately for consumers!) a dying trend. Even my business bank, Santander, back tracked massively this summer when I was told that their new monthly bank charges were actually only going to be for businesses who wanted to upgrade to their new service levels … and not an automatic move for all their customers.
Consumers have a voice now and you have to consider this in your pricing strategy
If you don’t like the prices you pay and you feel you are being ripped off, things can change as businesses who want to continue to grow and be successful today, have no choice but to listen.
But this is not about concerns over whether you are ripping your clients off – which I hope you wouldn’t be doing, anyhow!
This is about the concern I have for businesses who may be taking this pile ‘em high and sell ‘em cheap strategy on board. And I will be interested to know what your thoughts are on this topic.
This is particularly relevant point to make for those of you in the information industry. Yup, those of you who are coaches, consultants, therapists, trainers and anyone else who sells their time for money.
You see, if you sell information – which is what you do when you sell yourself – selling cheap can only be a bad thing. If you decide to compete with another corporate trainer on price and win the bid, are you a winner when you’ve dropped your hourly rate by 15%?
And once you’ve dropped your hourly rate once, it just gets easier and easier to keep on dropping it
You start to lose your nerve and start to justify to yourself that if you’ve done it for one client, then it’s expected for the next. A dangerous and slippery slope, don’t you think?
But the moment you start to compete with price by adjusting what exactly it is you are offering, then perhaps you can be on to a winner.
It’s never been easier to package up your offerings in to products and programmes. And products and programmes that need very little interaction from you. For example, home study products, DVDs, webinar training and group coaching programmes.
What this means is that you can still maintain your high hourly rate for your “VIP” clients who are prepared to invest but you can begin to take on the cheaper end of the market by offering them a cheaper product.
But whoo-oh … hold your horses. Does that mean you start to pile ‘em high and start selling ‘ em cheap?
Well, no. And again this is another concern that I have for many business owners who go down this route.
Just because you aren’t delivering the programme or the product that you are selling, that doesn’t mean you should go cheap. But this exactly where so many of you start … by creating a £15 ebook or £37 home study course.
You rationalise that if you charge low prices, it will remove the barriers of entry and more people will jump on board to spend money with you. You take on the Aldi and pound shop approach and pile ‘em high and sell ‘em cheap.
But what you probably don’t have is the foot traffic to give you the volumes of sales needed to make that first £1,000.
The pound shops are taking advantage of the cheaper high street rental costs and getting themselves literally a shop window in front of customers, but to generate the volumes of visitors to your website needed to make enough sales each month, takes some serious effort.
It’s do-able but it ain’t easy!
At the same time, you could also end up damaging the perception of your high-end hourly rate service if you try to market your new £15 product to everyone, all of the time.
So, what do you think of the new wave of pile ‘em high and sell ‘em cheap strategies?
Are you being seduced by this pricing strategy and starting to apply it to your small business? Is it working? Or is causing a slow painful death?
I’d love to know your thoughts on this matter so please leave a comment below.