The biggest undoing of small businesses is their inability to configure, package and price products into different offerings. Of greatest concern even, is the failure to publish prices of their offerings, preferring, instead, to treat every sale as a special deal and quoting the price separately. Generally, there are times when it would be appropriate to adopt the auction-styled pricing strategy and others where upfront display of the price would be preferable. The key to success is in knowing and understanding the company’s target market and the appropriate response to meeting their needs. Growing small business managers need to perfect their pricing strategy to avoid inadvertently turning away potential customers. By Nimroth Gwetsa, 31 January 2018.

How many times have you seen small businesses promoting their offerings and having been attracted to their beautiful creative works, soon becoming discouraged upon noticing that prices are not displayed?

I don’t know about you, but I sometimes feel “vulnerable”, perhaps owing to my lack of confidence in my pricing negotiation skills or concern that prices are discriminatory and dependent on one’s appearance or perceived financial status, that I do not bother asking for the price, but move on to the next store. I may have lost a good deal, but I do not worry too much about that because I don’t like buying on impulse. I usually do extensive research before going ahead with my purchase especially if the item purchased is highly prized. It may well be that failure to display prices may result in the sale being lost to a potential customer not in need of the product offered, but able to be induced or persuaded to buy it.

I can sympathise with small businesses in their failure to disclose prices upfront.

Perhaps managers are anxious and feel vulnerable to display prices on items on promotion fearing being accused of setting high prices or being undercut by rivals or taken advantage of by persuasive and perceived powerful customers. Perhaps owing also to lack of volume or precedence in selling that product, inexperienced managers unable to quantify the effort and material involved, cannot confidently determine the price, but prefer to negotiate it with customers.

Sometimes pricing difficulty may be owing to the company’s inconsistent use of material inputs in producing products, or it could also be that it offers highly customised products as opposed to standard offerings, thus unable to provide comparative prices. Worst still, the issue might be more serious than that, revealing the underlying shortcomings of the business’ operational competence. In which case, the company may be lacking skills and experience in quantitative analysis, thus being unable to set the sales price upfront until work is completed.

Whatever the reason, pricing and product configuration and packaging should not be underestimated as these are stumbling blocks to the success of many small businesses.

The mistake many small companies make in pricing is trying to recoup all past losses, or resolve their cash flow problems, or future income needs through their first or major sale. Perhaps they do this out of desperation and awareness of their low sales volumes or longer sales conversion cycle. Such anxieties may result in managers overpricing their offerings and inadvertently stunting possible growth of the business.

I do not believe there is a one size fits all approach to answering the pricing problem. However, experience and preparation assist in overcoming the pricing challenge. Without such experience or precedence, preparation should be heightened in that, it may be best that research be done against competition and market offerings, and expectations and understanding the target market’s needs. And where reverting at a later stage is acceptable, delaying responding impulsively and doing so later when confidence and contentment or acceptance levels have increased.

To simplify this problem and enable small businesses to confidently price offerings without the fear of being undermined or overlooked, managers need to thoroughly revisit the quantitative analysis competence and their product configuration. Further investments should also be made in communications and sales training, particularly one aimed at helping customers solve their problems through the company’s offerings.

Designers or developers know about different resources and materials that can be used to produce the company’s product. The operational costs of producing such products can and need to be quantified and measured at a granular level with the output expressed as a rate defined against time, mass or volume, among other considerations.

For the catalogue or promotions, a “signature” offering can be displayed or demonstrated to attract customers, yet promote other products to use readily affordable material and displaying related prices as the starting price of the portfolio and range of the company’s product offerings.

Whatever the company’s offerings and related pricing are concerned, there should be consideration for what the competition and market currently offer to ensure alignment and better management of customer expectations.

Many renowned institutions offer free online courses small companies may access to improve skills. The Internet is also “awash” with valuable resources from which to find material for skills development. Small businesses also need to make it a habit to “record” lessons they learned, so such problems can be anticipated and resolved proactively or when they occur.

Price your way to success. Happy new year.