Tag Archives: business

Pricing for small businesses

Whenever I talk to a small business, pricing is one of the things that most struggle with. But just as you have a strategy for your business, and spend time marketing what you do, having a pricing strategy is just as important.

Pricing can be difficult to get your head around – for example, why are some products worth so much more than others, when they basically offer the same thing?

Settling on a pricing strategy

There are different ways to settle on a pricing strategy that will work for you – and lots of things to take into consideration, such as:

  • Your customer – how much are they willing to pay for your products or services?
  • Your competition – what is your competition charging?
  • Costs – you need to know all your costs in order to be able to fix a price which makes you a profit.

 So, you need to find a pricing strategy that offers good value to your customers, competes with your competitors, and gives you a profit. This isn’t an easy concept to grasp.

Pricing strategies for small businesses

There are loads of pricing strategies out there, but these are just a few that I think are more relevant to the smaller businesses that I interact and work with.

Competitor strategy

If your products are competing with lots of other businesses who do the same as you, competitor pricing or strategy might be the best way to go. First, you need to research your competitors to find out what they charge for similar products to yours, and then monitoring their prices to ensure that your prices are the same or slightly lower.

This is a strategy that is most commonly used by supermarkets.

Penetration pricing

If you’re just starting up, or you have new products that are like your competitors, this is a popular choice. You start by offering a low introductory price for your new product, (or products if you’re just starting) and then gradually increase the price as the market gets used to your brand.

Economy pricing

If you offer low cost, budget products, this is a good pricing strategy. But you MUST ensure that you’re able to produce bulk quantities for a low manufacturing cost and still be able to turn a profit.

Price anchoring

If you sell both premium and budget products, then this may work well for you. You can put your lower-priced alternative next to a similar premium product – customers are more likely to buy the cheaper model. This gives them an immediate comparison without having to look at other brands or businesses.

Psychology pricing

It probably won’t surprise you to know that emotion influences a lot of the things we buy. Psychology pricing is the way that businesses set their prices to influence how customers perceive the value of a product or service.

The typical way of doing this is pricing just below round numbers or choosing prices that make products seem more affordable or attractive. If something is priced at £300 for example, and the same thing is priced by another business at £299, it’s more likely to be bought at the lower cost – although there is only a penny difference in reality.

You also see this in advertising, when you see for example, ‘8 out of 10 cat owners agree that this cat food is the best’. If they said ‘80% of cat owners agree….’, consumers are more likely to think – mmm, well 20% of cat owners didn’t agree, so that’s not good. Saying 8 out of 10 is exactly the same – it just sounds better psychologically.

Another example, and this is a clever one! Two companies are putting out offers on their products. One offers ‘25% off’ and the other company is offering ‘buy one, get the other half price.’

Which would you go for?

In fact, they are both exactly the same. The only difference is that the second offer saves us having to work it out in our heads. And mentioning the word ‘half’ creates an illusion that we are receiving 50% off the original price, but you’re actually getting 25% off each product.

How do I work out the cost of each of my products or services?

Deciding which pricing strategy to go with is all very well, but you also need to ensure that you make a profit on the things you are selling. If you buy products in bulk at a cheaper price and then add what you want to make on top, that’s easy to calculate. But if you make your own products or offer a service it can be a little more complicated.

Products

You need to understand what costs you have.

  • Materials – how much does it cost you to buy the raw materials to make your products?
  • How many products can you make with those raw materials?
  • Utilities – does it cost you money to produce your products (such as electricity to run machines, or maybe you use a lot of printer ink)?
  • Time – how much time does it take you to make one product? This is something small businesses often forget. To price your time, you need to set yourself an hourly rate that you want to earn from your business, and you can then divide that hour into how many products you can make in that time.
  • Packaging and postage – you need to also take this into consideration.  

Once you have all the costs above you can work out the cost of each product.  

I appreciate, as a small business myself, that the price you choose must be what your customers will pay on a consistent basis.

Services

Charging for your services is definitely challenging and one that I’ve struggled with a lot over the years. If your prices are too high, customers won’t come to you – and if your prices are too low, potential clients will think you are cheap or inexperienced. You must find the fine balance between the two.

As with a product business, your costs need to include admin and overhead expenses, as well as any materials you need to provide your service. There is no magic formula! As a service provider, you’ll probably find yourself changing your pricing from time to time, just as you’ll have to change your services to keep up with the latest trends.

  • As a service provider, you MUST know your competition. As well as looking at what they’re charging, it’s important to know exactly what they provide for that cost. You’ll find some that are cheaper than you want to be (but do they have the same experience and skills as you)? You’ll also find those that charge much more than you are expecting, (do they have more experience and skills than you do)? Once you have this info, you’ll have a broad price range to start with.
  • You also need to decide whether you will charge a flat rate or whether you will charge by the hour. This will depend on what services you offer. For example, I charge per hour for the coaching I offer, but for email set-up or social media content creation, I charge a flat rate, which has already considered the amount of time it takes me, plus overheads.  
  • You still need to know how much you expect to earn per hour – that is, how much is an hour of your time worth?

Finally, as a service provider, especially if you’re freelance, it’s worth remembering that you won’t be working a straight 8 –10-hour day and nor will you get paid for all the hours you do. Most freelancers find that only 50% of their time is billable. The other 50% is spent marketing their own business, finding new clients, and doing admin!  

Conclusion

I hope this has helped you see pricing a little more clearly, although I realise it is always going to be a bit of a grey area!

So, to recap, do your research so you know what your competitors do. Take all your costs into account, including your time. Then decide what you’d like to earn per hour and go from there.

If you need any help, as always you can drop me a message. I’m happy to help.

Creating problem solving content for product-based businesses

Over the past few weeks, I’ve had a lot of people ask about how to create problem solving content. And why would you need to do that, especially if you’re a product-based business? There is a lot of information out there about problem solving for service-based businesses, so this article is for all my product-selling followers! And by writing this and creating social media content around this subject, I’m creating problem solving content!

What is problem solving content and why do you need it?

The first thing I want to say is that you need to address your customers’ problems or pain points, without them feeling you’re giving them the hard sell. This is a real turn-off!

With social media being such a popular medium, it makes sense to have some engaging content that makes them think. Everyone loves to read a story and people love to be able to express their opinions or join in with a debate, so let’s look at how you can address this.

Problem solving content captures your followers’ attention by giving them an answer to a particular question or concern they might have. And provides tangible examples to illustrate your points.

Why do you need it? It helps your customers and potential customers imagine how they can use your product and that it is something they NEED in their life! Being able to picture themselves using your product and the benefits it brings is half the battle to getting a sale.

Understand your audience’s problems.  

I know I bang on about this all the time, but the first step to creating the content is understanding what problems your customers may have. This once again boils down to knowing your target audience and what challenges they face, what they might be interested in and any obstacles they might have (or excuses) for not being interested in what you have to offer.

One of the ways to obtain this information is to ask questions or conduct polls on social media, asking for feedback from your audience. For example, you may have a very popular product – ask WHY your customers like this particular product.

And ask what else they would like to see from you.

Give your audience solutions they understand and can relate to.

Once you understand the problems or worries your audience has, it’s time to think of ways to show them the solution – one they will understand and be able to relate to.

Don’t just tell them how to solve a problem, show them. You can use case studies, examples from reviews or recommendations, or an online tutorial or short video to illustrate how your product can solve a problem. This helps make your content interesting, engaging and gives them ideas as to how your products can be used.

Let me give you a few examples for different kinds of products:

You sell jewellery – it’s always exciting to show images and maybe slide shows of your jewellery, but if you have a customer who has bought something from you for a particular occasion, ask them to send you a photo of themselves wearing your jewellery. You can then use their review with a photo – it packs more punch.

Give ideas as to how a particular piece of jewellery could work. You might sell earring and necklace sets that would be perfect for a bride to wear on her wedding day. Photograph those sets with a wedding inspired background – if you use Canva, there are wedding inspired backgrounds you can use. Then, instead of just focusing on the bride, why not show other sets that may be in different colours that could be gifted to bridesmaids? If you do jewellery with different length chains, you can say that in your content.

If you make your own jewellery, show the process in step-by-step photos or be brave and do a time lapse video, stating that you offer a bespoke service for those special pieces or gifts.  

You make hair accessories – you can use all the same ideas as for jewellery, but also you can include children in your marketing. Children love hair accessories for many different occasions, such as going to school (could you offer scrunchies or hairbands in school colours for example?), or the same with a bit of bling for parties.

When you are advertising your products, show or give ideas as to how they can be used. If you do adult accessories, (as someone with long hair that gets in my way), you could push the angle of headbands/scrunchies are not only stylish and pretty but keep your hair out of your face when you’re gardening or at the gym.

You sell gift items – this is a broad category. You might sell soft toys, handmade items or personalised items, or a host of other things. But the principle is still the same. Give potential customers ideas on how they can be used and what events they could be used for. This could be birthday’s, Christmas, Easter, Valentine’s Day, Mother’s Day, Father’s Day, birth of a baby, christening, wedding – the list is endless. But if you have products that could be adapted to all these special dates, you have a bigger market for your products.

If you have safety features or must have safety certificates for your products, mention this, so people are happy that a product is safe to gift to children for example.

You sell beauty products, personal products, or home cleaning products – there are lots of ways to show and tell that these products solve problems. For skin products or personal products, it could be that it will make your skin glow, help with skin problems, is an effective deodorant, softens your skin after shaving – the list is endless. The key here is to do videos of you using the products or having lots of before and after photos from customers, or photos of customers using your products. Reviews about how it helped solve a particular beauty or personal problem will also give you social proof that your products work and are worth investing in. Tell customers that they don’t contain any nasty chemicals and if they are allergy friendly.

The same applies to cleaning products – are they eco-friendly and don’t contain harsh chemicals?  Do they work? Create videos showing you using the products, for example on a sink – before and after. Use customer reviews to give you social proof.

I could go on with all the different types of business out there, but the principles are the same, no matter what business you are in.

Be honest with your audience.

This goes without saying, but transparency is really important. Be honest about what customers can expect from your products and their solutions. Don’t promise something you can’t deliver or you’re not sure is correct.

Always set realistic expectations.

Engage with your audience.

This is more important than a lot of people realise. Talk to your audience. When they make a comment on your post, always reply to it and if necessary ask questions and engage in a conversation. If someone asks a specific question, answer it or if you think it might be more personal, reply that you will send them a private message – and ensure that you do!

Ask for feedback on your products, your content, your videos and ask if there is anything else your audience would like to see.  

Do you write a blog or have your own newsletter?

If you write a blog, you can use it to go into more detail about a particular product. A post on social media shouldn’t be too long or people won’t read it, but if they read your blog or have signed up to your newsletter, you have a captive audience, who WANT to know more or find out more about you and your business, including your products.

So, if you create a post that you could give a lot more detail about, write a blog post about it and advertise that on your social media account. And if you have a newsletter, include a paragraph every time about one of your products and how it solves a problem. Again, you can advertise this on your social media posts. This not only offers a more in-depth service, but it also directs traffic to your website or blog.  

Final thoughts

You need to know your target audience and what they want. You must understand what kind of problems they have that your products can solve.

If you feel you are struggling with how to create problem solving content for your business, I can help. Sometimes it’s a case of ‘two heads are better than one.’ I offer an hour’s brainstorming session, where we can discuss your business, find out more about your target audience and set a plan in place to create that problem solving content that will speak to your customers and ultimately get more sales. Either message me or drop me an email to make an appointment – cindymobey@outlook.com

Now, put your thinking cap on and get creative!