Monday Marketing Tip #4: Pricing IS Marketing

One of the questions entrepreneurs wrestle with is, "How much should I charge for my product or service?" There are many obvious factors that come into play in determining this:

• What is my cost and how much profit do I need/want to make?
• What are competitors charging for the same, or at least comparable offerings?
• What is the perceived value and what are people willing to pay?

But what is perhaps less obvious is that your pricing is a key part of your positioning. Remember, there is a market for goods and services at all price points. "Cheapest" isn't necessarily where you want to be.

Sometimes consumers will pay more for a prestigious brand, knowing, either consciously or subconsciously, that the visible ownership of the item is an outward symbol of success to their peers and the rest of the world -- Rolex watches, Gucci handbags, high-end luxury or exotic sports cars, designer clothes with logos, etc.

But consider this... how much of a man's dress shirt gets seen if you wear a coat and tie? Not much, right? Once they're both sent to the cleaners for heavy starch, a shirt from Wal-Mart will serve the function just about as well as a shirt from, say, Macy's or Saks. There's no logo, and no one is going to see the label. And yet, the typical business professional doesn't buy his shirts from Wal-Mart, and the Wall Street broker or investment banker wouldn't be caught dead in one.

It's not all about price, even when the functionality is comparable, and even when the branding isn't visible. There is the perception of quality, whether it's consistent with reality or not. The idea that "you get what you pay for" is ingrained in consumer consciousness.

Where you decide to set your prices becomes an important aspect of your positioning. You can then include price-based messages in your marketing that reinforce that positioning. Here are some examples:

• Low price
  • "Lowest price -- guaranteed."
  • "We will not be undersold."
  • "Best price in town."
  • "We beat our competitor's price by at least 5% or we'll give you $100."
    Note: Even if you lose money every once in a while, it will always be less than $100, and the marketing value of this is priceless - it puts teeth in the low-price claims.
• Mid price
  • "Great value at a fair price."
  • "5-star luxury at a 3-star price."
  • "We really will SAVE... YOU... MONEY!"
    This is the catch phrase that helped Houston's Jim McIngvale, aka "Mattress Mac", turn Gallery Furniture into the world's largest single-outlet furniture store, and himself into a billionaire. Interestingly, Gallery does not have the lowest prices on furniture, nor do they sell low-end furniture. It's mid-range furniture, at a fair price, with great customer service and a unique, fun shopping experience.
• High price
  • "The most expensive _______ in the world, and worth it."
  • "You get what you pay for... pay for the best."
  • "The Cadillac of ________."
  • "It's not a purchase, it's an investment."
    This is a great one - your offering is worth almost any price if it pays for itself in a reasonable amount of time.

Don't be afraid to pick a higher price point, even initially. Remember that your pricing reflects not only on what the market thinks your offering is worth, but what you think it is worth. What message do you want your pricing to communicate, not only to prospective customers, but to the media, investors and employees? Make sure that the price you pick accurately conveys that message.

Related: Pricing Strategy: How Much Should You Charge?
Related: Pricing Methods: Four Models for Calculating Your Pricing