For small businesses, pricing services properly is essential; the value of one’s name won’t induce people buy one’s product regardless of cost. “Pricing Strategies for Small Business” is a guide for small time business proprietors dealing start-up pricing for their goods and services, arguing that effective pricing can be the difference between instant success and miserable failure. There is no easy solution to the dilemma, and “Pricing Strategies for Small Business” is an ideal acquisition for fledgling business owners and for community library business collections.
COPYRIGHT 2008 Midwest Book Review
COPYRIGHT 2008 Gale, Cengage Learning
Every business must answer this question: How much do I charge? Most companies, most of the time, make a sort of muddled guess based on costs, what they perceive the market about them is charging and what they think they can get away with.
This says Okanagan resident, business consultant, human resources specialist and author Andrew Gregson, is pretty much akin to throwing a dart at a wall chart. With few exceptions it puts most business owners on the road to sleepless nights from poor sales or it leaves money on the table.
Gregson’s book sets out to provide advice on big picture strategies with specific tools on how businesses, whether large of small, should set their prices.
A few of the chapter titles give a good idea of what to expect: “How to Know if your Prices are Alright”, “Typical Pricing Methods in Use Today”, “Value Driven Pricing”, “Pricing Models”, “Financial Analysis’, “What Should I do to Fix my Pricing?”
The book concludes with a chapter of case studies and appendices that show how to calculate the information necessary for the owners to improve price strategies.
Equally important are the concepts around the strategies. Gregson argues that most businesses rely on pricing alone to determine what they should sell for, based on a hazy understanding of supply and demand in their market. Even if this was a good model to rely on, which Gregson says it is not, many owners are relying on bad information. They don’t know what is really in the market and just as soften they don’t have a good handle on what their true costs are.
Graphs, charts and tables show how to get better numbers, but more importantly, makes the case that customers don’t care what the costs are. They are interested in the value of a product and many businesses miss the mark when they are selling. Those competing on price alone (woe betide anyone set up next door to price crusher Wal-Mart) are selling what the vendors think is important, not what the customers necessarily feels is important.
Gregson’s big idea here is to price based on value and then communicate that value. Customers are willing to pay more if the see the value.
The book provides lots of clear examples of how some companies get it right and how to join the ranks. Gregson has done his book to address the concerns of all businesses so that Mom and Pop shop owners or mid=size manufacturers can learn something here.
The only question that Gregson leaves hanging is the moral issue: how much is enough? This may seem out of place for a practical how-to book, but I suspect many owners will feel slightly uneasy when given the option of taking all the money they can, regardless of cost. As Gregson notes in one example, many of us feel outraged when we hear that oil companies are selling gasoline at $1.50 a litre even though we know that their costs have not changed appreciably since it was 75 cents a litre. Gregson talks about this issue a little, but I think it is a perception of greed and the consequent guilt that unconsciously holds back some business owners from setting prices higher.
Chapters are short, most being 15 to20 pages of large print, usually address important questions almost on their own so that one can benefit without having to have read through the entire book at once.
Reviewed by Devon Brooks, Thompson Okanagan Business Examiner
One of the most challenging dilemmas entrepreneurs face about their product or service is the question “How much?” There are countless pricing philosophies around, so which one is the right one for your business? This book will help you examine your business in the context of choosing a pricing method that will improve your bottom line. Learn how to look at your business the way a potential customer would; understand the difference between cost and perceived value, and see how other areas of your business – merchandising, marketing and even staff motivation – have an impact on pricing. And if you need to figure this out now, check out “Where to begin if you need to solve a pricing problem tomorrow morning.”