A good friend of mine always used to tell me that until a customer squeals about the price they are paying for something, you’re not charging enough for your product or services. It’s an interesting concept and certainly one that cannot be universally applied, but it does make you wonder whether some businesses are charging enough for their services. It applies especially to small businesses, as regular readers will know what I think of big firm bullies, who behave as they wish to in terms of their dealings with their smaller counterparts and that includes the way they deal with their charges.

My marketing training taught me that there are two ways to position your business – offer a cheap product or service and hope that everyone will buy entirely on price or offer a quality product or service that customers will buy based on that quality. But take care not to mix and match the two. If you have a cheap offering, don’t overdo the bells and whistles; if you have a quality proposition, make sure that your pricing levels are appropriate to what you are offering. And that’s where many small businesses go wrong.

The ‘value for money’ proposition

The trick, of course, is to get to the so-called ‘value for money’ proposition. If you price it cheaply and over-deliver, you will never make a serious amount of money and end up a ‘busy fool’. If you deliver a quality service or product but don’t charge appropriately for it, everyone will love you, but your reward will come in heaven, whereas you could enjoy some of that reward on earth too.

The retail and leisure sectors find it a lot easier than the service industry. They conduct market comparisons and, in this electronic age and with the proliferation of comparison websites, it is easy for providers to compare their prices against those of their competitors. Those providing services find it a lot more difficult, but there are still ways and means of establishing what the right price should be, including market research and feedback questionnaires, which are relatively easy to organise and inexpensive to implement.

Don’t be afraid to review your sales prices on a regular basis. A small increase in your charges to current customers will generally yield more than a drive for new ones, at least in the short term. And if it feels like you are working for insufficient reward, talk to your customers about it. You’ll need good negotiating skills in most cases, but if the customer feels that he/she is getting ‘value for money’, they will probably agree to it readily.

And if you’re just starting up in business, make sure that you structure your pricing strategy from day one. There’s more to starting up in business than just the administration, although it’s important to get that element right too!