MT Expert: Pricing

Alastair Dryburgh explains how clever pricing can be a route to increased profits, and better customer satisfaction...

by Alastair Dryburgh
Last Updated: 09 Oct 2013

Think about value, not cost. If you have any sort of specialist knowledge or skill built into your product or service, you can create value for customers without any extra on your part. I once gave a five minute talk on pricing to a small business audience. One of the audience, a mortgage broker, picked up one of the ideas and used it to boost his income by 10% every month forever after. Value of the talk for him: huge. Cost to me of giving it: minimal. 

Differentiate yourself 

You won't be able to charge what you are worth if someone else can offer exactly the same for less. You need to make yourself different. This might mean a superior product, but it might be more intangible. Think about your favourite local coffee shop; the coffee and cakes on offer are no better than those in the local Starbucks, but customers prefer it because it's more individual, or the owner remembers them and what they usually drink. 

Avoid the lowest cost position 

Being the cheapest is usually a bad strategy. It works for a company like Ryanair, which ruthlessly and systematically organise the whole business for the lowest possible cost . If you can't get this single-minded focus on low cost, don't try to be cheapest. You will only fall between two stools – not cheap enough to make money at the lowest price, but not good enough to command a higher one. 

Offer options 

Can't distinguish between the big spenders, the middle of the road customers and the tight-fisted? It doesn't matter. Learn from Starbucks. Everything comes in threes.  Offer the options and let the customers sort themselves into the right group. 

Apply the acid test

You will know you have grasped these principles when you can deal effectively with this situation. Imagine you are dealing with a new prospect. He says "I like what you have to offer, but I also have an offer from XYZ competitor which is 10% cheaper." You reply: "Only 10%? You could find someone who would quote you 15% less than our price, but it's in your interest to come with us because...." If you can complete that sentence in convincingly you have nothing to fear, whatever the state of the economy. 

This is an extract from Alastair's book Business Remastered: Rediscover the Great Business You Already Have. For more practical advice and a free copy of ‘7 Hard Questions You MUST Ask About Your Business’, visit

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