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Your Pricing Strategy and Business Plan (2)

Guest post by: Michiel Jonker

Article Overview: How to deal with cost conscious consumers. When writing your business plan, you are obviously going to do some financial forecasts, get projected sales out etc. Ipso facto you will have to deal with the issue of pricing your products or services. In one of my previous articles I have dealt with general pricing principles. In this article I will deal with pricing your products or services with cost conscious consumers in mind.

Your Pricing Strategy and Business Plan (2)

Call them the CCC factor - Cost Conscious Consumers. The importance of price and cost in today's business environment is a simple certainty - not to mention the impact of the recession. Bottom line: consumers are price sensitive when buying - if we like it or not. Your business plan needs to deal with this fact of life. When spending time on your marketing plan section and financial forecasts, you need to consider how you will deal with price conscious customers.

Consumers want value for their money and they want to spend the minimum - especially during recession times. To attach the right price to your products or services will help a lot. It will guarantee that you keep growing your customer base and keep making a profit. However, that does not imply that you can persuade your clients by merely dropping your price every time, as this can lead to serious damage in the long run.

It is the value of the product that establishes its price - as far as your clients are concerned. You won't expect a luxury vehicle like a BMW to have the same price tag as a Mazda. And customers would expect a Mazda's price when looking for a Mazda.

You can attach value to a product by means of excellent marketing, investigation and education. Microsoft comes here to mind. They did an excellent marketing job in the past to add value to their products. The Microsoft case is actually an excellent marketing study case. It will help a lot in making sure consumers appreciate and agree to the price and the value of your products or services. In this way you can change perceptions - i.e. how a customer perceives your product or service. Your business plan's mission statement should also include this value proposition. For more information on mission statements, you can read my blog post on business plan mission statement.

Easy ways to convince a price conscious buyer is to give him/her a clear image of the advantages his/her expenditure in the long term. Every person prefers not to waste money and to have a real return on his/her investment. Thus, if you can persuade a customer that buys your product or service that it is not just about giving out money but about investing in something valuable and useful in the long run, customers will certainly consent to spend the money.

Demonstrating how the higher priced product will in the end solves a customer's troubles, and in so doing avoid trouble in the future, you may just be able to secure the contract or business of the potential customer. However, you need to persuade customers of the lasting advantages of the purchase.

With quality products or services and excellent marketing campaigns, chances are good that customers will assemble in front of your shop, waiting for you to open your doors (and if you have an e-commerce business, that should be for 24 hours!). Even if they have to spend some more dollars, clients normally want the mod and best in the market to add some quality to their life. So, providing excellent products or services will always bring customers back, asking for more. It should not hurt.

Now, here is the secret: cost conscious consumers' buying decisions are not only based on price! So, keep it in mind when addressing this group of the market. You need to understand their needs if you want to offer the complete value of your product or service. If you don't do that, you may end up dealing with price concerns only! This won't contribute to your bottom-line (profit and business success) at all.

So, we need to study our current and potential customers. What make them buying? If you know their reasons, you would be able to sell ice to Eskimos - i.e. even products that are more expensive. If you fail to do exactly that, you going to end up cutting prices and eventually your profits. And you cannot build a successful business in this way. In my opinion this also presents a form of profit erosion. When you cannot secure the business of cost conscious consumers, you are actually missing out on potential profits...

A strange concept for you? Read our business plan guide for more information.

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Article Tags: business plan, financial forecasts, price sensitive customers, pricing strategies



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