Ah yes, that old chestnut of pricing. You’ll hear many myths and stories about pricing products, many of which over-complicate the issue somewhat.
I have decided to share with you the best practices for a pricing strategy behind selling your brass band sheet music. Instead of bombarding you with all sorts of useless info and conjecture, I am restricting this blog post to bullet points and key points to note. To put it bluntly, I am showing you what works.
Firstly, let’s explore a few myths…
1) Customers won’t buy my music if it’s too expensive. ANSWER: Rubbish!
2) Selling my music cheap will mean they will buy it. ANSWER: Rubbish!
3) If I sell my music cheap, they will come back again and again. ANSWER: Rubbish!
If you have fallen into any of these traps, don’t worry, you’re not alone. We’ve all done it at one stage another.
Customers will pay good money for good products. Period! Selling your music too cheap generally means you have no confidence in it. Why should the customer? As for point number (3); just think how expensive it will be to keep that customer who only spends a few quid a month. Do you really have the energy to sustain a customer like that?
Pricing is about one thing and one thing only: VALUE FOR MONEY. Repeat it. Repeat it again. Repeat it in your sleep. For the next 50 years.
So what is pricing about? That’s right, value for money. Now, I know you’re intelligent, so I know you are thinking, “well duh, of course pricing is about value for money” – BUT, do you actually deliver on this? Many who are new to business almost always put “price” and “customer service” together. As soon as you do that, you loose all judgement of the pricing of your products. In fact, pricing has nothing to do with customer service.
Here’s a few things you must remember:
1) Have a good pricing spread of low – mid – high, so you can target all price-points. It is important not to use discounting as a method of price spreading. Notice how I didn’t say “cheap”. Nobody wants cheap things. They want useful, valuable things without spending the earth. If you sell cheap rubbish, you’ll attract rubbish customers who you will not be able to (or is too expensive to) move on to your more profitable items.
2) Value what you have. If you think your product is great, and it is actually great in some quantifiable way, demonstrate that in your pricing. Trust me, people will pay. Have confidence in your own product, and people will have confidence in you.
3) Sometimes looking at the competition is a bad idea. I know, “business 1-0-1″ right, look at what your competitors are charging. Let me ask you this; do you believe that you have a better product? Do you you believe the customer will get more value from your product? Do you believe the customer will get more value from your business as a whole? What more do you offer that the competition doesn’t? Do you see a pattern here? Value what you have. If you judge your value against your competitors value (whom you’re supposed to be out-doing anyway!), then you’ll forever live in the shadow of their success. Value what you have; set your own standard and believe in it.
4) Plot a ‘law of diminishing returns graph’. Yes, the boring bit. I won’t explain it here, but you can investigate it yourself. But by plotting this graph, it will allow you to evaluate how far to put the price (up or down) to produce a meaningful profit percentage increase/decrease. Why? Well, if you ask the man on the street and ask them to plot a price to profit ratio graph, I bet they will draw a straight line; i.e. profit is directly proportional to price. Incorrect. The curve is actually a [inverted] curve, and it gets steeper and steeper. This is because production costs are likely to be static; you have an unchanging property (production) against a changing one (price), and this affects how much % profit you will make. In short, the more you put your price up, the ratio of profit will decrease. So, if your music sells for £20 and you put it up to £25, you might make an extra 10% on that £5 price increase. But if you increase the price up to from £25 to £30, you’ll probably make an extra 8%. So for the same amount in price increase, you’ve decreased the % profit ratio. I hope that make sense. Learning how to plot this graph will be a good scientific way to judge deal prices, etc, and if you’re planning a price increase/decrease, how much extra/less profit will you actually yield?
Target price-points for low-mid-high, not by discounting, but by having valuable products at each of these price points.
Don’t be afraid to charge a lot. Be confident in what you can offer, and your customer will have confidence in you.
Forget about what others are doing. Instead ask, “What am I doing?”. Ask this question, and you’re thinking like a business person.
Value for money, and value for life. Don’t sell them cheap tat; after all they are spending their own hard-earned pennies on your music. Respect them and give them something they can be proud to have spent on. If a customer is enjoying shopping with you, why not give them something free. If they’ve given you a few hundred quid or so in sales, you can afford to pop them something extra. Remember, the RRP is what the customer pays, COGS is what you pay. And the COGS would be the “expense” that you incur. Very inexpensive way to impress a customer of value!