Pricing Strategies :: How Low Can You Go?

A recent article by INC magazine entitled “How Low Can You Really Go?” reexamines modern pricing strategies and it got us thinking. Cutting prices is a knee-jerk reaction to slowing sales and price cuts raise some tough questions:

• Will deep discounts cheapen your Brand?
• Once cut, can you raise them again?
• How do you deal with narrower margins?

Here are three pricing strategies to consider:

Woo the Recession Worriers

People don’t want to spend money in this economy. The money they do spend they want to feel like it was practically a steal. Woo these customers by slashing prices on your middle to bottom-shelf products or services while leaving the top shelf priced as is. Purchasers will tend toward the middle-lower shelf stuff, but the top-of-the-line stuff will keep their bargain in perspective.

Bottom line: Low-cost items will help make up a significant portion of 2009 sales, even if they fall short of last year’s numbers. These days, there’s little room for inflexibility.

Cut the Fat. Leave the Meat.

Some are hesitant to cut prices with the assumption being customers will never pay full price again. Some even try to compete on service rather than price. However these days, service is great, but CEOs are shopping at WalMart. Cut your prices, but cut them with a scalpel not a hatchet. Consider cutting costs on products with manufacturer goal rebates, renegotiate shipping costs and offer free shipping, cut prices on services with the greatest margins.

Bottom line: Competing on service instead of price is tough. Offer limited, carefully crafted discounts and it will boost sales without branding you as a discount seller.

But, Wait, There’s More

Perhaps businesses could learn a thing or two from Ron Popeils’ famous line. Consider not discounting the price of your products or services, but rather offering more of those products or services. BOGOs (Buy One-Get One), free accessories (buy a drill-get a free set of drill bits), and complementary offers (purchase digital cable and get internet and HD DVR for free) are quantity and quality bundles that will add value to a static price. You’ll also make Ronco proud.

Bottom line: Bundling more for the same price can be an effective way of staying competitive without cutting deeply into profits. Beware, however, of overload. Your product or service must be bettered with quantity. I only need one toaster.

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