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4 Pricing Strategies That Work for Small Companies

Eric_Rudolf — Mon, 14 Feb 2011 18:07:52 +0000

As many of you know, this article is Part 2 in a two-part series on product and service pricing. And I am happy to say that so far, Part 1 (4 Pricing Mistakes You Need to Stop Making) has generated a surprising number of comments and spurred some interesting debates among Marketing people. One of the more heated Twitter conversations compared and contrasted the pricing strategies of big companies versus small ones; and as I was following their discussion, one comment in particular—from a marketing executive within a multi-billion dollar firm—caught my attention:

“When it comes to pricing, big companies use hard data and statistics. Small companies just wing it.”

Not only did this comment completely reinforce the reason I started this blog in the first place, but it strengthened my resolve to never, EVER work for a member of The Fortune 1000 again. The fact is, coming up with a price for a product or service is EXPONENTIALLY more complicated at a small company, for the exact reason stated above. Small companies and startups not only lack the historical data often necessary for pricing analysis (FYI—companies like Ford have been collecting data since 1903), but many of them operate in niche industries where the majority of competitors are privately held, and offer no visibility into their pricing models.

So with all of the above in mind, are there a few product and service pricing strategies that small companies can use without ‘winging it,’ even in the absence of mathematical models and 100 years of economic trend analysis? Absolutely. And they are outlined below, along with two bonuses: real-world examples!

Pricing Strategy #1: Set Your Price Relative to Value or Quality

Overview: In its simplest form, this pricing strategy involves setting your price in direct proportion to the value or quality level you wish to project in relation to competitors—a higher price being indicative of a more valuable (or higher quality) product than a lower price.

Reasons for Use: Like the other pricing methods presented here, setting your price relative to value or quality is easy—and involves nothing more than a quick glance at the competitive landscape. Obviously this pricing strategy is most effective in industries where there is a significant difference in the value of each competitor’s product or service. But in some cases, this pricing strategy has worked extremely well in industries where the difference in value between competitive products is only perceived.

Bonus! Real-World Example: By definition (and by law) vodka is to be odorless, tasteless and colorless. In fact, Section 5.22 of the U.S. Government’s Standards of Identity for Distilled Spirits defines vodka as follows:

“. . . neutral spirits so distilled, or so treated after distillation with charcoal or other materials, as to be without distinctive character, aroma, taste, or color.”

Yet, despite the fact it is illegal for drinkers of Vodka to be able to tell the difference between brands, consumers can pay anywhere from $9 to $60 or more for a 750ml bottle. And as martini snobs are painfully aware, there is a $6 to $9 per-martini difference between a rail drink and one made from booze found on the ‘premium’ shelf.

Pricing Strategy #2: Set Your Price Based on Relative Features and Benefits (Competition-Based Pricing)

Overview: This method involves setting your price using similar competitive products as a baseline, then raising or lowering your price based on the presence (or absence) of specific features and benefits. Using an over-simplified example: if the market leader’s product has ten primary features and your similar product has only eight, you might set your price at 80% of the market leader’s price.

Reasons for Use: Not only is this method extremely intuitive, but it mirrors the decision-making process that most customers use when deciding among different brands (i.e. “Should I pay for more features, or save money and settle for less?”). It also makes the lives of your Sales and Marketing people easier, by giving them tangible differences to point to when potential customers ask why your price is different than a competitor’s. And finally, if you are marketing in an industry where regular improvements are expected, this method makes the pricing of newly released products and services extremely easy as well.

Pricing Strategy #3: Set Your Price to Compensate for a Reseller Discount, and Possibly a Discounted Reseller Price

Overview: This strategy involves setting the List Price of your product or service higher than you normally would, knowing that your reseller channel will demand a heavy discount—and possibly sell the product or service at a discount as well.

Reasons for Use: Primarily applicable in industries where a significant portion of a company’s products or services are not sold direct, this strategy allows a company to maintain a certain level of margin on sales, while still giving its reseller channel a standard percentage discount AND giving the reseller the room to sell at a discount as well.

Bonus! Real-World Example: In the mid-2000s I did some Marketing for a high-end independent publisher. One of the company’s business titles was a perennial category leader, outselling competing books by a margin of over 10 to 1. Because of this, the publisher only sold the book direct through its own e-commerce site, and NEVER discounted the book from its $39 List Price.

As the book became more popular worldwide, demand for translated versions increased. Although the publishing company sold the English version exclusively through its own store, it was decided—due to the inherent complications with International shipping and customs—that the primary sales channel for translations would be Amazon.com. However, a pricing issue soon arose. In exchange for reselling the books worldwide, Amazon.com demanded a 55% discount from the book’s projected List Price of $39 per copy. At a printing cost of only $3 per copy, the publisher had been enjoying $36 of margin on the English version of the book by selling direct, but the pending deal with Amazon.com for translations was much less attractive—under $18 of margin per copy. And to make matters worse, Amazon.com was planning to sell the books at 37% off of List Price—a move that flew directly in the face of the publisher’s desire to be the ‘premium price leader.’

So what did we do? We raised the List Price of all translations to $69. This allowed the publisher to sell books in bulk to Amazon.com at a price of $31.05 each (only $8 less than a direct sale) and still enjoy a $28+ margin per book. Additionally, the new List Price caused Amazon.com to sell the books at just over $43, thus retaining the publisher’s premium price within the marketplace.

Pricing Strategy #4: Set Your Price Based on Convenience

Overview: This pricing method is relatively simple: if your product is more convenient to buy, easier to use, or comes with an upgraded level of service than competitive offerings, charge more than everyone else does.

Reasons for Use: This pricing method is second nature in service-related industries, where customers are regularly presented with the option of paying more for upgrades or a wider variety of services. But it is also used extensively on the consumer product side. At some point in the last few months everyone reading this book has paid a premium for something because of convenience—a wireless router (no cords), a kinetic watch (no batteries), pre-cooked chicken wings (no grilling), a self-inflating raft (no pumping), a pre-assembled kids meal (no lunch box needed), pre-measured sugar or coffee packets (no thinking) or a jar of good old-fashioned pre-mixed peanut butter and jelly (for the truly lazy at heart).

Wrapping it All Up

When it comes down to it, the question “How do I effectively price my small company’s products and services?” can rarely be answered with math, formulas, and complex calculations. If it could, coming up with a price would be easy—we would simply feed a few numbers into an economic model, click the mouse, and wait for our over-used laptops to spit out a number. But the inherent lack of data at small companies forces us to price our products and services based on things like perception, convenience, and competitive offerings; which, in reality, is much more complicated . . . and nowhere close to ‘winging it.’

Comments? Questions? Feel free to reply to this post. Otherwise a Retweet, Facebook Share, LinkedIn Share or other type of social share (handy buttons provided) would be greatly appreciated. Thank you!

4 Pricing Mistakes You Need to Stop Making

Eric_Rudolf — Tue, 11 Jan 2011 15:48:04 +0000

Of all the things I was asked to do early in my career as a marketer, one of the most intimidating was determining the price of my company’s products and services. To this day I still remember the first time I was asked to come up with a go-to-market pricing strategy, and will never forget the stress I felt and the questions rattling through my brain. Am I taking all of the relevant factors into consideration? If my price is wrong, could this negatively affect the perception of the product? Is my job at risk if I screw this up?

But after pricing nearly 400 products and services over the last 18 years, I realize now I was completely over-thinking the entire process. Although my first instinct was to start crunching math equations and digging out my Economics textbooks from college, it is clear now that simplicity—and a little bit of common sense—can go a long way when it comes to determining the price of a product or service.

This article is Part 1 in a 2-Part posting on pricing strategies, and will focus on four commonly used pricing methods—as well as their fatal flaws. Part Two, tentatively titled 4 Great Ways to Price Your Products and Services, will be published and available within about two to three weeks of the date of this post.

Pricing Strategy #1: The “I Want to Make X Number of Dollars” Method (a.k.a. Cost-Plus Pricing)

Overview: This is the typical manufacturing-driven pricing model, whereby Executive Management calculates how much something costs to make or deliver, then adds a percentage or dollar figure on top of the calculated cost to come up with a final sale price.

Reason for Use: Cost-Plus Pricing is used in many situations because it is easy to calculate and easy to administer. Many also believe that it is the easiest way to ‘guarantee’ their company at least some level of profit on every sale.

The Mistake: When one of your competitors figures out how to manufacture a product or deliver a service more cost-effectively than you do, you will be forced to sell at a loss until you can figure out how to be more efficient. Cost-Plus Pricing also has a second fatal flaw: it completely ignores both the customer AND the market—as well as a little thing called “The Supply and Demand Curve.”

Pricing Strategy #2: The “Let’s Ask People What They Would Be Willing to Pay” Method (a.k.a. Market-Oriented Pricing)

Overview: This method centers around researching or actually communicating with the target market of the product or service directly, then using the collected data to come up with an ideal price point.

Reason for Use: It is relatively easy and inexpensive to ask someone what they might be willing to pay for something, or what your product or service might be worth to them. Unlike other methods, this one also involves the potential customer in the pricing decision. And for the numerically challenged, this pricing method requires no math.

The Mistake: Asking potential customers what they would be willing to pay might seem like a wonderful idea on the surface, but it completely underestimates the intelligence of the target audience. No matter how far you go to hide the intentions of your survey, most respondents will figure out exactly what you are doing (trying to come up with a price) and will tell you what they WANT to pay—which is obviously much less than what your product or service is actually WORTH.

Pricing Strategy #3: The “Let’s Come in Low and Raise the Price Later” Method (a.k.a. Penetration Pricing)

Overview: Not to be confused with Loss Leader Pricing (selling below cost in an attempt to move other goods or services) or Predatory Pricing (selling below cost with the intention of driving out competitors), Penetration Pricing is the practice of setting a low initial entry price, with the intent of raising the price once market acceptance has taken place.

Reason for Use: From a pure economic standpoint, Penetration Pricing will result in more sales, and therefore an increase in market share. Penetration Pricing is also used by many marketers to tear people away from existing brands, and give new ones a try.

The Mistake: Although companies might have had good success with this pricing method 20 years ago, the mere existence of the Internet—and the increased speed of information flow—now means that customers are only one or two clicks away from someone willing to make the same sale for a few dollars less, or in some cases a few pennies less, than you are. A second problem: if a competitor lowers their price to match yours, what is your next move?

Pricing Strategy #4: The “Which Group Are You In?” Method (a.k.a. Third Degree Discrimination Pricing)

Overview: In a nutshell, this particular pricing method involves dividing your target market into discrete groups—by age, gender, organization size, geographic region, non-profit status, etc.—and publishing a specific price (or discount) for each group. For the academics in the audience, you will note that I specified “Third Degree” when referring to the Price Discrimination; specifically excluding First Degree (an ability-to-bear model) and Second Degree (where price varies according to quantity sold).

Reasons for Use: Third Degree Discrimination Pricing is a great way for companies to spread out their risk and revenue streams, and extract money from a variety of low-end vertical markets that might not otherwise make a purchase. Many companies also use this method to work their way into large government and non-profit agencies, where contracts are larger and more long-term.

The Mistake: Although an effective strategy in service industries (senior discounts on movie tickets, ladies’ night at the local hangout) companies who practice Discrimination Pricing on the Retail or Industrial side open themselves up to having their products resold for a profit by people with the right connections (read: an EBay account). Also, contrary to popular belief, a company’s membership in one of your pricing groups does not necessarily discourage them from demanding additional discounts if they believe their order volume or visibility warrants an extra few pennies off . . . which those of you who have dealt with Walmart already know.

Conclusion

Discussing a few examples of pricing traps is certainly a good first step, but the larger question still remains: “How do I effectively price my company’s products and services?” The fact is, determining an optimal price for the things you company sells has little to do with math, formulas and complex calculations, and is based more on perception, convenience and competitive positioning—a point I intend to prove in the recently-released second half of this article, titled 4 Pricing Strategies That Work for Small Companies.

12 Essential Sections of a Great Marketing Plan + Template

Eric_Rudolf — Tue, 15 Sep 2009 17:06:21 +0000

I’ll never forget the combined feeling of excitement and panic the first time my boss asked me to create a Marketing Plan for a new product. While part of me was excited by the fact I had finally ‘arrived’ as a professional in my field—much like a doctor being asked to treat a first patient—the remainder of me was scared to death, because in reality I had absolutely no idea what a usable, real-world Marketing Plan actually looked like.

Sure, I had created a handful of semi-meaningless plans while earning my MBA, but this situation was different. I was being asked to create a comprehensive roadmap that would be used by over a dozen people to release, market, and make money on a brand new product. And unfortunately, I didn’t have a clue where to begin.

Attempting to climb out of the hole I dug for myself, I spent the following evening at the local bookstore, flipping through everything from college textbooks to home-based business manuals. Although I came across a number of ideas for sections to include in my plan, the closest I came to finding the parameters of a ‘standard’ marketing plan was information in a textbook on something called The Four Ps of Marketing . . . the worst over-simplification of the Marketing process ever documented in textbook form.

It was after this evening of research and several extended conversations with colleagues that I realized something: in a smaller company environment, there is no such thing as a standard marketing plan. And over a decade later, I now understand why: because every small company executive and stakeholder who ever commissioned a marketing plan was looking for something different.

Since the research project I conducted nearly a decade and a half ago I have created hundreds of marketing plans, ranging from a single page to well over 50 pages—not counting supporting documentation. Although each is unique in its own right, I have found over the years that the list of ‘most commonly included information’ in these plans can be narrowed down to a short list of only 12 manageable sections, as follows:

A High-Level Description of the Product or Service
A Description and Size Estimate of the Target Market
Competitive Differentiators
Proposed Marketing Messaging
Packaging, Pricing and/or Bundling Strategies
Marketing Vehicles Used
Required Changes to the Company Website
Initial Rollout Activities
Ongoing Marketing Initiatives
Projected Sales Volumes and Margins
Required Year 1 Marketing Budget
Product Development Assumptions

To further explain each of these marketing plan sections, I have created a downloadable Marketing Plan Template in PDF format, which you may take free of charge. The file is 4 pages in length, and approximately 150k in size. Please follow this link to download it:

tool-the-12-essential-sections-of-a-new-product-marketing-plan

In exchange for this tool, I ask only for one thing: a Retweet, Facebook Share, LinkedIn Share or other type of social share (handy buttons provided). Thank you!

A New Definition of Marketing for Small Companies?

Eric_Rudolf — Fri, 08 May 2009 16:43:19 +0000

Although the textbook authors at Prentice Hall, McGraw-Hill and Houghton Mifflin might not agree, the definition of Marketing is not a static, catch-all descriptor that can be indiscriminately applied in any situation. Marketing is a sliding scale; a moving target that changes based on industry, audience, and most importantly company size. While larger firms can spend ridiculous amounts of money simply throwing their logo in people’s faces (a practice referred to as ‘branding’ . . . see Super Bowl for more details) small companies have no choice but to drive real and measurable results—and in many cases sales—from every single marketing initiative.

The point is, as small company owners and managers it is critical we maximize our marketing dollars by executing on initiatives that actually qualify as marketing . . . something much easier said than done. With this in mind, a few weeks ago I took it upon myself to create a NEW definition of small company marketing; one that more accurately reflected a small company’s need to a) spend wisely, and b) receive value in return for each marketing investment. Here is what I came up with:

Small Company Marketing: any initiative used to reach customers or potential customers that either results in an immediate sale, or directly and measurably shortens the sales cycle.

To see if my definition would hold up in the real world, I tested it using some of the more traditional, big-company things people often put into the ‘marketing’ bucket. The ten initiatives I used were as follows:

Collecting business cards in a fishbowl at a trade show.
Producing a corporate video for distribution on a website.
Issuing a press release announcing the hiring of a new CFO.
Sending a monthly customer newsletter.
Purchasing Pay-per-Click advertising.
Hosting a free speaking event.
Offering a free, downloadable white paper on a website.
Sponsoring a snack break at an industry conference.
Applying for and winning a “Best Places to Work” award.
Sending a new catalog to a rented mailing list.

Based on the definition given above, were there any initiatives here that didn’t count as ‘marketing’ in small companies? Surprisingly, there were five. When I applied my new definition of small company marketing to the list above, I discovered that numbers 1, 2, 3, 8 and 9 do not pass the test. Aside from the fact that none of them directly result in sales, it would be difficult to claim they could even shorten a sales cycle. Taken aback by my findings, I showed them to a (skeptical) big-company friend who demanded answers as to why—and how—things like collecting business cards and winning awards can’t possibly be considered ‘marketing’ initiatives at small companies. Here is a portion of the email I sent her:

. . . regarding example #1, collecting business cards at a trade show might give your sales people a pile of names to follow up with, but without some sort of prequalification you can’t possibly claim these people are interested in what your company sells. In terms of example #2, corporate videos are nice, but rarely bring potential customers one step closer to buying something. Many people consider PR part of marketing (example #3), and in some cases it can be—but your customers don’t care about your new hires. Sticking your logo on a table tent at a trade show (example #4) is a pure branding initiative, and winning an employer award (example #5) might help you recruit better employees, but won’t generate additional business.

On the other hand, numbers 4, 5, 6, 7 and 10 do indeed qualify as marketing initiatives. Customer newsletters keep people on your list up-to-date on new releases, special promotions and upcoming sales. Pay-per-click drives interested parties to your website for more information and can shortening the sales cycle. Speaking events can educate potential customers on the benefits of your products and services, white papers are designed to present the challenges your products and services help solve, and catalog mailings will prompt interested parties to call, email, and ideally order something from you.

Hope this helps

The fact is, small companies rarely have the money or the head count to pursue non-revenue generating initiatives. But surprisingly, many small firms use a significant portion of their marketing budgets to do just that. Until someone can convince me otherwise (feel free to do so) I am going to begin using this new definition of small company marketing, and will convince everyone I know to do the same.

Real-World Benefits of Twitter for Small Companies: Part II

Eric_Rudolf — Mon, 04 May 2009 13:35:26 +0000

Like many of you who regularly visit this blog (over 6,000 now—thank you!) I have spent countless hours reading about, researching, and experimenting with Twitter over the last few months. My goal is to answer one simple question: “Can this technology be used to make a positive impact, financial or otherwise, on a small company?” This post will act as Part II in a series of posts focusing on real, results-driven business uses for Twitter. In the first part of this series I outlined Twitter’s benefits related to growing your company’s internal database. Here in Part II, I will continue with a road map for using Twitter to smooth out your web site’s inconsistent traffic patterns.

Also, as with all posts at THEsmallCOMPANYBLOG.com, please feel free to linkback or pingback to this article—giving proper credit, of course.

Real-World Twitter Benefit #2: It Can Smooth Out Your Website Traffic

Anyone who runs a traffic dependent website designed around lead generation or a shopping cart lives and dies daily with the ups and downs of their website traffic. I still remember the inconsistency of my first three months like it was yesterday: 2 visitors on Monday, 31 on Tuesday, zero on Wednesday and Thursday, 15 on Friday, and so on. For me, this irregularity was mostly an inconvenience. But if I were running a lead generation or e-commerce site, the emotional and financial stress would have been much more painful.

By offering an easy, immediate and inexpensive (read: FREE) way to drive people to a website, Twitter can help level out your traffic during off-peak periods. If you are running a legitimate small business whose goal is to generate sales inquiries or drive people to a shopping cart, averaging three to four attention-grabbing Tweets per week is plenty. Why not send them during otherwise off-peak times? For example, if your website generates 80% of its overall traffic Friday thru Monday, why not lean on your loyal Twitter followers to pick up the slack during the otherwise slow middle of the week?

Although attractive perks in their own right, Twitter’s ability to level out web traffic lies not with ease of use or cost, but with the unique ability it gives companies to control the timing of marketing messages. Using free services like Tweet Later, companies of any size can literally decide down to the second when they want marketing messages delivered to customers—which, in turn, gives companies control over WHEN their customers visit the site. Is this Internet thing cool or what?

The fact is, healthy websites don’t have dry spells or bad weeks—and they don’t take 50% of their monthly traffic in a single afternoon. Healthy websites have consistent traffic patterns which allow their owners to do things like trend analysis, revenue prediction and market research. Although Twitter won’t smooth out all of your website’s traffic bumps, many companies large and small are learning it can definitely help.

Real-World Benefits of Twitter for Small Companies: Part I

Eric_Rudolf — Tue, 28 Apr 2009 15:17:06 +0000

More than any other social networking site in worldwide use today, Twitter owes a significant portion of its recent growth to pyramid schemes, egocentric celebrities, get-rich-quick gurus, and kids from Amsterdam with nothing better to do than collect thousands of new followers per week. While these people continue to tie up Twitter’s bandwidth by posting 140-character brain farts in rapid succession, my focus continues to be on the business side—specifically, whether or not a small company can use this revolutionary (and easy-to-use) microblogging technology to drive interest, increase marketing effectiveness, manage projects, and decrease operating expenses.

Over the last few months I have spent countless hours researching and experimenting with Twitter in an effort to answer one simple question: “Can this technology be used to make a positive impact—financial or otherwise—on a small company?“ This post will act as Part I in a series of posts (I estimate at least five total) focusing on real-world, results-driven uses for Twitter by small companies. As with all posts at THEsmallCOMPANYBLOG.com, please feel free to linkback or pingback to it—giving proper credit, of course. If you would like to use the content of this post in its entirety on your website, please email me directly at eric@thesmallcompanyblog.com . . . and ask nicely.

Real-World Twitter Benefit #1: It Can Jump-Start Your Internal Database

Those of us who run or manage small companies understand the importance of building an internal opt-in database. There are few things more valuable than the contact information of a potential customer who WANTS to hear from you. But as of late, some of the more traditional list-building tactics like free downloads, online coupons and contests seem to be losing their luster. If the recent economic downturn has caused your internal database to level off or even shrink, adding a Twitter feed to your marketing mix could be exactly what you need to start growing your contact list again.

First and foremost, starting a Twitter feed can allow your small company to reach previously unsolicited markets. In the case of my website, until I joined Twitter (http://www.twitter.com/TSCB/) my marketing efforts were specific to small company owners and managers, and targeted only to people located in the United States. Since setting up my Twitter account I have expanded my web site’s reach to include the UK, Western Europe, Canada, Mexico, India, and North Africa. In addition, I am now being followed by business magazines, Internet radio stations, published business columnists, and multiple media groups—several of which will hopefully syndicate my content some day. Left to my own devices, I could have never generated this level of interest in such a short period of time.

Second, setting up a company-based Twitter feed will give your organization a new channel to reach its EXISTING contacts as well. If you’ve been in business for more than a couple of years, it is likely your core group of customers and prospects has received dozens of emails, newsletters, phone calls and direct mail pieces from your company. Giving these loyal followers one more clever (and somewhat trendy) way to hear from you can do nothing but increase the read-rates of your marketing messages.

In terms of growing a business database through Twitter, there is one BIG red flag small companies need to be aware of: half of the people who follow your company feed will have no intention of ever buying anything from you. The fact is, no matter how you approach your company’s Twitter strategy, having professional ‘followers’ (who want nothing from you but a follow-back) in your list is nearly unavoidable. But as long as you understand and accept this going in—and focus your efforts on the followers who are serious—a corporate Twitter account could be a huge benefit to your growing organization.

Tips for a Tough Economy: Marketing on a Small(er) Budget

Eric_Rudolf — Tue, 17 Feb 2009 18:06:36 +0000

When the economy worsens and the term “401″ more accurately describes my account balance than the retirement vehicle itself, marketing services firms across the nation try to get their finger on the “our method is most cost-effective” scale. If you read their self-promoting white papers and newsletters, you will find that nearly every sector of the marketing services world is claiming their method is tailor-made for tough economies. But which marketing methods REALLY give you the most return for your marketing investment? Pay-per-Click? Direct email? Web ads? Database marketing? Webinars? Direct mail? The answer is, IT DOESN’T MATTER. Because as long as you keep making these five marketing mistakes, you’re going to lose money no matter what you do.

Marketing Mistake #1: Using Shotgun-Style Approaches. If your company spends $10,000 to get its new print advertisement in front of 1 million readers of a magazine (only a penny per thousand people) is it a good investment? Not if only 2,000 of the magazine’s readers are in your target market. If you don’t know how many legitimate potential customers are in a group you’re marketing to, you have no business booking the campaign—especially in a shaky economy. Do your homework in advance of booking your campaigns, and calculate the REAL cost of reaching your target audience.

Mistake #2: Spending Money on Marketing Campaigns You Can’t Measure. Once you make a conscious decision to weed out shotgun-style marketing approaches, the next step is to eliminate any campaigns that don’t have measurable performance metrics. How much money is your company making from its trade shows, print ads and pay-per-click placements? If your marketing department doesn’t have a way to answer the question, don’t write the check.

Mistake #3: Not Moving Your Money Around. Marketing is different than the 401(k) I mentioned in my intro. When I don’t get my money out of the stock market in time, I’m pretty much stuck re-buying the same stocks, in hopes that someday they all rebound and the principle of Dollar Cost Averaging finally works in my favor. But small companies are not under the same obligation. Don’t make the mistake of continually re-investing in certain campaigns because of some unwarranted need for marketing ‘variety.’ If certain campaign types work better than others, increase your focus in those areas.

Mistake #4: Not Negotiating with Vendors. When the economy is slow, your marketing budget will shrink . . . but so will the list of people wanting to advertise in the same places you do. Here’s a tip: if your current marketing budget is smaller than last year, tell your vendors. Less than three weeks ago I explained to an ad rep I had been working with for four years that my marketing budget shrunk by 20%. Within a half-hour she rewrote my quarterly Insertion Order and sent it back to me–with a 20% discount reflected. Available advertising inventory ( both print and web) has grown SIGNIFICANTLY over the last year. There is no reason you can’t take advantage.

Mistake #5: Not Marketing. If you really sat down and gave it some thought, you’d probably realize you’ve completely lost track of a few competitors recently. In an effort to hang on for dear life, these companies have more than likely stopped spending money on marketing. But unless your company sells luxury boats in Detroit, there are still customers out there! By cutting off your marketing efforts completely, you are assuming the risk that your business can live off of its existing customers indefinitely. Are you willing to take this chance?

THEsmallCOMPANYBLOG » Marketing Plan

4 Pricing Strategies That Work for Small Companies

“When it comes to pricing, big companies use hard data and statistics. Small companies just wing it.”

Pricing Strategy #1: Set Your Price Relative to Value or Quality

Pricing Strategy #2: Set Your Price Based on Relative Features and Benefits (Competition-Based Pricing)

Pricing Strategy #3: Set Your Price to Compensate for a Reseller Discount, and Possibly a Discounted Reseller Price

Pricing Strategy #4: Set Your Price Based on Convenience

Wrapping it All Up

Related Articles You Might Enjoy:

4 Pricing Mistakes You Need to Stop Making

Pricing Strategy #1: The “I Want to Make X Number of Dollars” Method (a.k.a. Cost-Plus Pricing)

Pricing Strategy #2: The “Let’s Ask People What They Would Be Willing to Pay” Method (a.k.a. Market-Oriented Pricing)

Pricing Strategy #3: The “Let’s Come in Low and Raise the Price Later” Method (a.k.a. Penetration Pricing)

Pricing Strategy #4: The “Which Group Are You In?” Method (a.k.a. Third Degree Discrimination Pricing)

Conclusion

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