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Pricing Strategy and 5 eye opening reasons to have one · Enhance.training

• 0:02
  SPEAKER_00: Hello and welcome to this Enhanced.training podcast on Pricing Strategy, 5 eye-opening reasons why to have one and why you need to give it the attention it deserves.
• 0:14
  SPEAKER_00: Enhanced.training provides online business training for busy managers, so take a look at the courses on offer and think about transforming your performance and your business.
• 0:25
  SPEAKER_00: My name is Anna, and I'm taking you through this subject because I love pricing and I love seeing the results come in when pricing is set right.
• 0:35
  SPEAKER_00: I have over 15 years experience from some top FMCGs working in finance alongside sales and marketing.
• 0:43
  SPEAKER_00: During that time I learnt a great deal, I saw what really worked and more importantly what didn't.
• 0:49
  SPEAKER_00: And now I get to share these secrets so others can benefit from the skills I've learned and don't have to spend 15 years learning all about it.
• 0:58
  SPEAKER_00: Okay, let's get into the podcast.
• 1:03
  SPEAKER_00: The words pricing strategy make many of us shudder or think of business jargon that only large companies worry about.
• 1:11
  SPEAKER_00: But unfortunately, this isn't the case, and in this podcast we're going to explore five reasons why your business will thank you if you give pricing strategy the attention it deserves.
• 1:22
  SPEAKER_00: Five reasons that make you want to get your pricing strategy right.
• 1:26
  SPEAKER_00: Now, pricing is one of the classic four Ps of marketing product, price, place, promotion, and whilst we love pouring out for the other three, pricing often gets left out or left until last, almost as an afterthought.
• 1:40
  SPEAKER_00: But it really shouldn't be like that.
• 1:42
  SPEAKER_00: There are at least seven different pricing strategies to choose from, and which one or combination of them you choose will have an impact on every other element of your business.
• 1:53
  SPEAKER_00: So why is it that it's so important to get right?
• 1:56
  SPEAKER_00: Surely a best guess will do, or I mean what difference can a clear strategy really make?
• 2:02
  SPEAKER_00: Let's go through it now.
• 2:05
  SPEAKER_00: A pricing strategy can for starters make you more profit.
• 2:10
  SPEAKER_00: Price is the element in your business that has the biggest impact on profits.
• 2:15
  SPEAKER_00: Increased sales and distribution are good if they're profitable, but once you've got a distribution base, it's pricing that really makes or breaks your business.
• 2:23
  SPEAKER_00: In a famous study by McKinsey, they found that a price increase of just 1% led to an increase of 8% in gross profit.
• 2:31
  SPEAKER_00: Now it sounds obvious, but if you price too cheaply, you will not make enough money, you will not have enough cash in your business to survive, or to invest in the things you want or need.
• 2:42
  SPEAKER_00: The scary thing is that many people do not even realise they are pricing too cheaply.
• 2:47
  SPEAKER_00: They see the sales come in and assume their business is doing well.
• 2:51
  SPEAKER_00: However, your business might not be doing as well as you think.
• 2:55
  SPEAKER_00: For example, if you've used cost plus pricing but have not included absolutely all your costs, or maybe your costs are out of date, are you still making a profit?
• 3:07
  SPEAKER_00: Let me give you a real life example because I know of a business who sadly had this very experience, a business that unfortunately had to close because of the errors that were made while the products themselves were selling really well.
• 3:21
  SPEAKER_00: Now in this particular year the business had turned over two and a half million, more than two and a half million pounds in the year.
• 3:29
  SPEAKER_00: However, it also had a loss of more than£40,000.
• 3:34
  SPEAKER_00: Now the owner thought his business was doing well, the sales were coming in, all looked great, and it was only at the end of the year when he did his accounts did he realise he'd made such a loss.
• 3:45
  SPEAKER_00: A loss that he couldn't afford, and he was left with no choice but to fold his business.
• 3:50
  SPEAKER_00: The worst thing was he knew that if he'd kept track of his costs earlier in the year, he could have made his changes and adapted his prices to account for his increased costs.
• 4:00
  SPEAKER_00: He could have made different business decisions.
• 4:03
  SPEAKER_00: His business could have survived if only he had got his pricing right.
• 4:08
  SPEAKER_00: So look at your costs and your pricing now.
• 4:10
  SPEAKER_00: Examine all your business costs, not just those associated with your products, and review them regularly so you know how profitable you really are.
• 4:19
  SPEAKER_00: Even if it's unwelcome news, it's so much better to find out sooner rather than later.
• 4:24
  SPEAKER_00: So you can adapt, you can change, and your pricing needs to be able to make you a profit.
• 4:31
  SPEAKER_00: Now, having a pricing method that stops you losing money is clearly critical, but having the right strategy can also help you gain more listings.
• 4:40
  SPEAKER_00: Retailers want products that will make them a profit, drive people into store and keep them coming back.
• 4:46
  SPEAKER_00: To get the listing in the retailer you want, you firstly need to be clear and precise about your product's benefits and how it matches that retailer.
• 4:55
  SPEAKER_00: You need to know what that retailer wants and needs to be able to price accordingly.
• 5:00
  SPEAKER_00: If you know what they want, you can design a pricing and support package that will tick all their boxes as well as your own.
• 5:08
  SPEAKER_00: Spend time understanding what you can afford to give a customer, and then you know that any deal you do will make both you and the retailer money.
• 5:17
  SPEAKER_00: If your price is too high, no one will list it, but if it's too low, you will lose money.
• 5:23
  SPEAKER_00: It's really important you don't simply copy what someone else is doing in pricing as they're unlikely to have the same costs as you.
• 5:30
  SPEAKER_00: Take the competition into account and then build your proposition around it with what you can afford.
• 5:37
  SPEAKER_00: Now a pricing strategy can also get you more sales in the right places.
• 5:43
  SPEAKER_00: Your pricing strategy needs to match your product, your marketing and your business capability.
• 5:49
  SPEAKER_00: All together you should aim to get your products in the right retailers and channels.
• 5:53
  SPEAKER_00: Now the closer the match, the stronger the sales are likely to be.
• 5:57
  SPEAKER_00: Let's go through a couple of examples.
• 5:59
  SPEAKER_00: Let's think of two products.
• 6:01
  SPEAKER_00: Product A could be a high-quality organic vegan chocolate bar with expensive ingredients and premium packaging.
• 6:10
  SPEAKER_00: The marketing, let's say, has been focused on high-end influencers, so really premium product.
• 6:16
  SPEAKER_00: And product B, this is more of a mass market health food snack.
• 6:20
  SPEAKER_00: It needs high volumes to get the cost of manufacturer down low.
• 6:25
  SPEAKER_00: The packaging is basic, again, to keep costs low, and marketing has been focused on sampling to get the product into as many people's hands as possible.
• 6:34
  SPEAKER_00: So that premium chocolate bar, that product A, now that's likely to need a premium price point to cover its premium costs.
• 6:42
  SPEAKER_00: If it's listed in high-end retailers and speciality stores where the consumers are willing to pay more for quality, then the sale should follow.
• 6:50
  SPEAKER_00: But were it to be listed in a discount supermarket where the focus is only on price, it would struggle.
• 6:56
  SPEAKER_00: And if it lowered its price to get a listing there or to get sales there, it's unlikely that it would make any profit.
• 7:05
  SPEAKER_00: Whereas our mass market health food snack, our product B, is the opposite.
• 7:10
  SPEAKER_00: It could afford to have a lower price and would be more suited to the discount supermarket.
• 7:15
  SPEAKER_00: If the price matches consumers' expectations and pockets, sales will be high and costs will be low, and they will have met their goal of selling to as many people as possible.
• 7:25
  SPEAKER_00: So creating a pricing strategy to match your product and your business aims means you avoid wasting time trying to list your product in places that will not work for you.
• 7:34
  SPEAKER_00: The key is also to match your product's price with its environment to maximize your earnings.
• 7:41
  SPEAKER_00: What else can a pricing strategy do?
• 7:43
  SPEAKER_00: Well it can help your customers understand your product better.
• 7:47
  SPEAKER_00: Now there's a reason why price is one of the original four Ps of marketing.
• 7:51
  SPEAKER_00: It's because price helps us show the consumer more about the product.
• 7:54
  SPEAKER_00: It helps them form an opinion about it.
• 7:57
  SPEAKER_00: Therefore, it's important that all your messaging to your consumers is aligned.
• 8:01
  SPEAKER_00: The quality of your marketing, your product, your packaging, where it's sold, and its price should all match.
• 8:08
  SPEAKER_00: This will help the consumer know what to expect and they can judge how much they're willing to pay for it.
• 8:14
  SPEAKER_00: If your price is too cheap, customers may doubt the quality, and if it's too expensive, they may doubt they're getting value for money.
• 8:22
  SPEAKER_00: In both cases it will put them off buying.
• 8:25
  SPEAKER_00: Now we can see this if we return to our products A and B, our chocolate bar and our health food snack.
• 8:32
  SPEAKER_00: If a consumer sees product A has premium pricing, it's made with premium packaging, it's made with premium ingredients, and it's sold in a premium health food store, they would expect a premium that premium price too.
• 8:47
  SPEAKER_00: But if it were priced too low, the price would detract from the brand, and it can make them question whether it really was a premium product.
• 8:54
  SPEAKER_00: Now if product B was listed in the same store with its basic packaging and basic ingredients, what would you think if its price were the same as that of product A?
• 9:03
  SPEAKER_00: What would you think of the store if the product were priced really really low?
• 9:08
  SPEAKER_00: Well, for me, at the higher price, I would not really feel I was getting value for money.
• 9:13
  SPEAKER_00: But at the lower price, I might think it was a good deal, but I would wonder why it was being sold in a premium store.
• 9:19
  SPEAKER_00: It might make me question their commitment to genuine premium products.
• 9:23
  SPEAKER_00: Either way, it wouldn't be a perfect fit and would leave me feeling a bit confused and not sure.
• 9:30
  SPEAKER_00: And finally, a pricing strategy can stop you needing to discount all the time.
• 9:36
  SPEAKER_00: It's all too easy to agree to any discount to get your product listed in your ideal retailer.
• 9:42
  SPEAKER_00: But should you give them a discount?
• 9:44
  SPEAKER_00: Do you need to?
• 9:45
  SPEAKER_00: And most importantly, can you afford to?
• 9:48
  SPEAKER_00: If you have a robust pricing strategy in place, you will know the answers to these questions before you even go into that meeting.
• 9:54
  SPEAKER_00: You will know what you can afford to give away.
• 9:57
  SPEAKER_00: And more importantly, you will know why you should give a discount and on what conditions.
• 10:02
  SPEAKER_00: Let me give you a sneaky tip.
• 10:04
  SPEAKER_00: If you are asked for a discount and you agree to it, make sure you get something in return.
• 10:09
  SPEAKER_00: Never give away any value for free.
• 10:12
  SPEAKER_00: You could offer discounts for shorter payment terms or prime shelf location, perhaps exclusivity in store.
• 10:20
  SPEAKER_00: Know what you not what you want or what you need and what you can afford to give away.
• 10:26
  SPEAKER_00: If you priced your product incorrectly, you'll find out.
• 10:30
  SPEAKER_00: If you're always being asked for discounts to help your product sell, it's too expensive.
• 10:35
  SPEAKER_00: Either that or you've not communicated its value well enough, or it's not in the right situation.
• 10:41
  SPEAKER_00: Make sure you know what your customers and consumers value.
• 10:45
  SPEAKER_00: If your products match what they value, they'll be willing to pay the price you set.
• 10:49
  SPEAKER_00: This is at the heart of value pricing, which is nine times out of ten the most profitable way to price your product, and I cannot recommend it enough.
• 10:59
  SPEAKER_00: So where are we then?
• 11:01
  SPEAKER_00: We've gone through these five reasons why a clear pricing strategy is crucial to your business, and I really hope that you'll take a second look at your pricing methods and strategy and check that the pricing method you have chosen is the best one for your business.
• 11:15
  SPEAKER_00: It really is worth spending the time and effort to get your pricing right.
• 11:19
  SPEAKER_00: Your business will definitely thank you for it.
• 11:25
  SPEAKER_00: We hope you enjoyed our podcast about the importance of pricing strategy.
• 11:30
  SPEAKER_00: To learn more about product pricing and getting your product listed in retailers, visit enhance.trading and check out the following.
• 11:39
  SPEAKER_00: You can sign up to our Pricing Learning Hub to get more free articles, podcasts and videos.
• 11:45
  SPEAKER_00: Take a look at our product pricing for profit course, specifically designed for sales, marketing and finance managers and business owners.
• 11:54
  SPEAKER_00: They are aimed at all who sell into retailers or distributors and want to gain confidence in pricing your products, sell larger volumes, and increase your profitability.