How to set your prices and how this affects sales

1. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Marketing
Pricing

2. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Agenda
• Business Surgery
• Workshop
– Pricing
• Action planning

3. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Workshop Context
MARKETING SALES OPERATIONS MONEY
SYSTEMISATION AND RESILIENCE
BUSINESS PLANNING
VALUE
BUSINESS DIRECTION
PEOPLE

4. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Learning Objectives
• To explain the role of price in marketing
• To understand the factors that affect price

5. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Benefits and Price
• The reasons customers leave
– Death or moving away:
– The influence of friends or relations:
– Competitor marketing & offers:
– Dissatisfaction with product or price:
– Perceived indifference of supplier:
4%
5%
9%
14%
68%
Source: “Lessons From The Field” Feiertag & Hogan

6. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Benefits and Price
Source: “RightNow Technologies
Price Service
Suppliers think
customers leave
because of:
48% 21%
Customers actually
leave because of:
25% 73%

7. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Benefits and Price
CORE
PRODUCT
ADDITIONAL
BENEFITS
INTANGIBLE
BENEFITS
A new stove
We’ll deliver and
install it
You can take out an
additional warranty

8. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Benefits and Cost
CORE
PRODUCT
My costs
Lower
Customer
value
Higher
Lower
Higher

9. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Pricing Factors
• What factors affect the price you can charge?
– The degree of competition, choice and transparency
– The balance between supply and demand
– The power of customers
– Market price and customer expectations
– Your direct costs
– Reason for purchase
• Desire, need or compulsion? Urgency
– Customer switching costs (lock-in) or what they forgo
by choosing someone else (USP)
– Risk, brand or reputation

10. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Pricing
• Why is pricing important?
Unit price £10 £11 £9.50
Units sold 10,000 10,000 10,000
Sales revenue £100,000 £110,000 £95,000
Direct costs £90,000 £90,000 £90,000
Gross margin £10,000 £20,000 £5,000
Units for same gross
margin
5,000 20,000
Sales revenue £55,000 £190,000
Direct costs £45,000 £180,000
Gross margin £10,000 £10,000

11. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Price Curve
£0
£50
£100
£150
£200
£250
£300
£350
£400
£450
£500
0
10
20
30
40
50
60
70
£10 £12 £14 £16 £18 £20
Grossmargin
Demand(unitssold)
Unit price

12. Copyright ©Nick Bettes Consulting www.nickbettes.co.uk
Implementation in Your Business
• Suggestions
– Review your mix of benefits and prices to identify
price increase opportunities