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How to defend and justify your pricing print Print

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Often small businesses find themselves justifying their price to customers, and then being pressured to think “I’ll give a discount to get the sale”. But if you’re confident in your pricing strategy you shouldn’t need to give away your margin. So what are the best ways to defend your price?

First, ensure you are confident in your pricing strategy

It’s important to have done your due diligence when setting your pricing. You need to know how much profit you want to make, what costs you’ll have and what the market will pay for your product or service. If you’ve done your homework properly, you’ll have more confidence and be in a better position to defend your pricing.

See our guide on what to think about when setting your price for more detail.

Defending your price

Second, help your customers accept your price

Once you’ve done your homework you can be confident on your pricing strategy. Here’re some tips on how you can instil that same confidence amongst your customers:

Point out your added value

Talk to your customers about the key benefits of your product or service, and why they should choose you. To customers who are price shoppers (‘cheapest is best’), you could point out that there’s more to a product than price alone, such as quality, productivity, guarantees and warranties, faster delivery and free installation. Come up with a package of advantages that distinguish your product or service from the competition, and train staff to divert customer attention away from price using this bigger picture. Explaining this added value can help ensure that price is not an issue.

Find and exploit the weak link

This is similar to the point above, but it looks at the added value you offer from another angle.

Customers have concerns other than price. It’s up to you to find out what they are and take advantage of them. For example, people are often frustrated if an electrician doesn’t turn up on time. Could you convince customers it’s worth paying a higher price with you if you can guarantee that you’ll arrive on time - or it’s free?

Similarly, they might be annoyed at pushy sales tactics in sales people or find the fine print stressful.

If you can pinpoint the weak link in your industry, you can solve that issue – whether it’s providing a life-time (or a certain period) warranty, or leaving the job tidier than when you started –to help justify your price.

Dealing with customers who research online

People often visit retailers to inspect a product then buy it online at a better price. Or they visit your competition’s website, and ask whether you can provide a similar product for the same price or lower, instead of ordering online from your competition.

Just as we’ve outlined above with exploiting the weak link and explaining your key benefits, you can get round this by zeroing in on the anxieties people have about internet purchases and showing how your product or service is superior. Will the competition’s product turn up in the condition you expect? Will it be delivered on time? If it breaks, how easy is it to sort a replacement?

On the other hand, you can offer the prospective customer peace of mind by offering great customer service. In this way, you’re shifting the focus from price to the advantages of buying directly from you.

  • Tell them about positive feedback you’ve received from other customers to reinforce the social proof of your product or service.
  • There are consequences to a failed negotiation on price for a customer, such as that they can’t make their purchase that day. Point out these consequences in a friendly way, and remind them of the advantages they’ll get if they buy the product from you now.

Final tips

While you’re convincing people that your price is worthwhile, you should also remember:

  • Sometimes you will reassure your customers that you are the right business to deal with by not budging on price.
  • And if you can’t reassure your prospective customers, people who try to beat you down on price can be the worst type of customer to have. It won’t be a total loss if you lose them.
  • Always keep your cool. Remain professional and friendly when a customer challenges you on your price.

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