FACT OR FICTION?
Pricing can be a tricky part of a business plan and marketing strategy.
Key areas to consider when it comes to pricing include:
- Price perception
- Price research and competitor benchmarking
- Revenue v Profit
- Promotions and discounts
An example I can sight is where I worked on behalf of the investors to align the business for European market entry into Asia. This was for an NFC and cashless payment system for events based in Singapore.
The strategy focused on building the business quickly and maximising its value to get the best selling price possible. The second focus was in planning the exit – the sale of the business. This steered our business activities towards that point, as a constant reminder.
When I started to consult they had only one event done to showcase. The issue was apparent to me… the owner was pricing the tech service and product as if it was essential and was well proven…where he saw it should be as if it were already a success. When in fact it was a ‘nice to have’ and unproven in its claims and functions. The theory was there, but the evidence was not!
So how did this business go from 1 event to but out?
I started by establishing the potential sales funnel, where were to events the business could facilitate? These were our TARGET CLIENTS.
Next was to get our offering solid, we worked hard on making the tech tight and finding the best way to share this information. This was the COMMUNICATION.
What was needed to fulfil the orders, keep the company trading and grow? This was the FINANCIALS.
But how could we turn the ‘nice to have‘, easy, tried and tested method on its head and become an essential? This involved a clever pricing strategy…because unproven was a problem we chose to use it to our advantage.
I suggested that we confirm the overheads for the tech and running of the company. We propose to the event organisers that they pay for cost for the event we provided services for. The caveat was that any balance remaining after the customer claim time went to our company. For example for an attended event of 8,000 people and $2 was left on each balance, the company would profit $16,000. The costs were covered so it was only profit for us… a GAMBLE if you like. This made it more affordable for the event organiser and showed we had ‘skin the game’ for it to work.
Pretty soon the business had 2 small and 2 large scale events a month. With further proof/evidence came further opportunities we converted.
If the business had not been agile enough to do this it might have meant another 6 months of no trade income and the business failing completely.
It didn’t instead it did get bought out by a European company that wanted to establish and run in Asia.
Defining the vision for the business will help with the identification of clear objectives, and determine how these goals will be pursued as the business evolves. Marketing flows through all aspects of a business, applying the correct pricing strategy and marketing strategy was crucial to the success of this small tech start up.