Pile ’em high, sell ’em cheap; it’s a pricing strategy that many of the “big brands” are taking right now.
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.
I agree with you, Karen – it’s important to keep your hourly rate at the right level, rather than discounting it, even if others are charging less. You’re not just selling information – you’re selling your take on things, which is of value to your clients. However, it’s difficult not to be drawn into price wars, when “competitors” reduce their prices – or even offer for free what you’re charging for. In the end, though, if people want it, and it’s good value, then they will pay for it, regardless of the price.
Holding your nerve when you’ve got competition is tough! Thanks for your thoughts Julia
A great article Karen, Lots of food for thought, it’s something that I have been thinking about for some time as I set up my own online community. The club has been free for some time while I set the other layers up. What is interesting for me is looking at the back end, while there are lots of people in the community very few people come back twice, I think this is because there is no financial investment or motivation; it’s just another thing they have joined. Price I think also inspires people to take more action, they start to take their investment more seriously, if it is to cheap then they may join but this isn’t good for you, them or the club.
I have taken a layered approach, invite people in from my own contacts to get some great word of mouth marketing. New people coming in get access to a basic training course dripped every 5 days, if they want to get the rest of the content and other activities then they upgrade to a monthly fee, this fee is currently reduced for three months and will be increasing for new members in the New Year.
This decision has been based on the target market I am looking to attract, what they will pay and what they need. But as you have pointed out, this is a hard one to market and takes some serious on-going marketing to get the numbers up to make it viable.
I am not sure what the number is but I also suspect that you have to have a certain number in a community for it also to become active and interactive.
Lots to think about 🙂
Wendy
@TheTweepleQueen
thanks for stopping by Wendy. Really appreciate you taking the time to leave your thoughts.
I suppose starting with a ‘free’ product to increase your list works when you are finding your feet and settling a style for the ‘bigger’ products later on. This is important if you are to charge properly for them, as they would require a lot more work and provide substantially more information. It’s not worth ‘undervaluing’ your time and expertise you’ve worked so hard to obtain. And anyway, higher prices weed out the wheat from the chaff who would probably do some good with these products.
Hi Karen,
I agree, definitely not a good strategy to cheapen 1-to-1 personal access to you, but getting potential clients onto your product staircase (or marketing funnel – whichever term makes sense to the reader here 🙂 through a small “trust transaction” – a cheap report for example (but one full of good value) – is a useful marketing strategy quite a few people use to good effect.
If people spend a small “throw-away” amount & you really deliver, firstly they’ve sort of self-qualified themselves anyway, and they’re more likely to become fans & buy higher-ticket products or services.
And if you can automate & systemise so that this takes almost no time (called the “no access” model” as peopel don’t have personal access to you/your time), and have a good email/follow up sequence to lead these clients on to bigger & better things, that’s the ideal… in a perfect world anyway 😉
Hi Karen
My business is creating hand painted wedding stationery, and pricing is always an issue to me. Had an interesting conversation with a wedding photographer this weekend, who says he always offers three price options – a really expensive VIP package; a good all round package at a moderate (though not cheap) price; and a much cheaper, fewer frills package. He says very few people take the cheapest – they don’t want to feel like cheapskates – and the eye-watering price of the most expensive option makes the middle one look really attractive. So he sells lots of the medium-price packages, which is what he’s really after anyway. Clever him – am thinking about doing the same!
Clever him indeed. It’s a great pricing strategy to take 🙂
I’ve been taught this recently too – it’s called contrast framing I believe – and good to hear it works in practice 🙂
I run a holiday lettings business in south-west France. My overheads in France are relatively high in terms of business taxes although, being one of the lucky ones, I don’t have mortgages on the properties I offer. Lots of people have come out to “live the dream” and have resorted to pile ’em high and sell ’em cheap tactics out of sheer desperation in the hope that at the end of the year their revenue will be “something like”. Although I do feel that to hold your nerve in today’s economic climate is not always easy. Whilst I can’t control the volume of lettings or enquiries to any great extent, other than by widening our advertising, what I can control is our monthly expenditure – as much as I’m able to do – i.e. undertaking low-cost improvements rather than major investments.