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Your EnterQuest Bulletin - Issue 261
In this week's issue:
Five pricing strategies for small businesses When any small business has to price a new product or service, they tend to do so without any clear objective in mind. While it's true that the main objective of setting a price is to make as much money as possible, it's also worth pointing out that there are different routes to reach that objective. In other words, being clear about your objective will have a significant impact on the price you set for your product or service. Without getting bogged down in too much detail, here are five pricing strategies that small businesses can use to meet different business objectives. Each strategy can result in a totally different price to meet those objectives. 1) Pricing low for market penetration The objective here is to gain as many customers as possible, for example when you are entering a new market. You would use this strategy if you have a big 'back-end' product or service (one that you can use to get repeat custom) that you plan to sell as a follow-up to your lower priced 'front-end' (the first sale you get from a customer). 2) Pricing to be market competitive You'd consider this when your objective is to be competitive in your market and ensure you're being considered for tenders, proposals, auctions or other competitive pricing situations. You would use this strategy when your product is very similar to your competitors' and you're limited in the methods you can deploy to differentiate your service. 3) Pricing high to maximise your profits Known as price 'skimming', the objective is to generate the maximum amount of profit per unit that you sell in the shortest amount of time. You would use this strategy when your product or service is unique or new with no competition, and you have a short-term window of opportunity to skim the maximum profits before copycat products start flooding your market. 4) Pricing to make a 'normal' profit The objective is to set a price that is perceived by your customers as being honest and reasonable. You might use this strategy when you have a key major customer or group of customers, and where gaining their trust is of vital importance to you. In this case, you could use a cost-plus pricing strategy where you price your product or service to ensure you make a 'reasonable' profit, but your customers still think you're offering them very good value for money. 5) Pricing for maximum profit and maximum sales The objective here is to generate the maximum amount of profit possible, but not at the expense of losing customers along the way. You might use this strategy after the initial introduction of your product onto the market, but where you have gained the ability to start differentiating your offer from your competitors' services. Whatever your own situation when it comes to pricing your product or service, hopefully after reviewing these five strategies you'll realise that your price is not simply just a function of the cost to produce your product or deliver your service. It's more a function of what you want to achieve in your market at that particular time.
Preparing a brief when planning market research Practical market research requires a good brief - an analysis of the problem and setting out the objectives that need to be achieved. The brief is the most important part of the research process because if it is well thought out the research approach will be easily proposed. The following questions should be considered when preparing a brief:
This tip is an extract of an article from EnterQuest's sister publication, BETTER business magazine. Subscribers to the magazine can read even more articles to help them find and keep more customers, including:
To receive a free copy of BETTER business magazine simply send us your name and address to enterquest@cobwebinfo.com, putting 'EQ magazine offer' in the subject box.
Each week we provide you with summaries of some popular or emerging business ideas in the UK and elsewhere around the world.
Regularly improving your vocabulary is not just about learning a new word and its meaning. It will improve your general knowledge and make you feel and act smarter in all sorts of personal and business situations. Do you know the meaning of the word 'lambaste'? a) to criticise severely Answer at the end of the Bulletin.
The following topical business issues have been recently reported in the media. Did your radar pick them up? 1) The Confederation of British Industry (CBI) has published its latest year-on-year retail sales figures for April. Retailers selling which types of products have been hit particularly hard by consumers tightening their belts because of the credit crunch? a) household goods 2) A recent report by the British Safety Council (BSC) revealed that which of the following groups of workers is seriously injured in the workplace every 40 minutes? a) workers aged 50 and above 3) According to the Federation of Small Businesses (FSB), small businesses in town centres are suffering because of which local authority-driven measure? a) CCTV in high streets Answers at the end of the Bulletin. Free online courses from the British Library The British Library has launched a series of online courses to help entrepreneurs and small business owners get to grips with intellectual property. There are three courses to choose from: course 1 covers the basics of intellectual property; course 2 covers searching databases; and course 3 helps you get to grips with analysing the markets. Users need to register their details before they can take the courses. Utility Watch website Utility Watch reviews the phone, mobile phone, gas and electricity services on offer to small and medium-sized businesses and tries to get business owners a better deal using its buying power. It provides free quotes for new prices and tariffs and users can sign up to a newsletter service. Free safety guides for small businesses The SafetyGuru website has a range of free health and safety guides covering different sectors. Users can download guides relating to the type of health and safety activity being managed, or by sector. You need to accept the terms and conditions of the licence agreement before you can download any factsheets. Flood guide from the Environment Agency Last summer's floods caused millions of pounds worth of damage to small businesses. The Environment Agency has a flood guide to help small businesses minimise the risk of damage by flooding to their businesses. The tools will help you to develop a flood plan.
This book will provide an insight into the world of family-run businesses and will be a useful read for anyone involved in one. It covers the ups and downs of running a family business and how to avoid family feuds. Check out:
Visit www.enterprisequest.com to access all back issues of the EnterQuest bulletin. If you have any feedback or suggestions for us to make this service more relevant please e-mail your comments to enterquest@cobwebinfo.com. If you wish to discontinue your subscription to EnterQuest please click on the 'SafeUnsubscribe' link at the bottom of the bulletin. Remember that we guarantee never to sell or give your e-mail address to anyone else. Good luck The EnterQuest Team This information is meant as a starting point only. Whilst all reasonable efforts have been made, the publisher makes no warranties that the information is accurate and up-to-date and will not be responsible for any errors or omissions in the information nor any consequences of any errors or omissions. Professional advice should be sought where appropriate. |
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