Pricing products and services

How to defend and justify your pricing

Often small businesses find themselves having to justify their price to customers, and then being pressured into giving a discount to get the sale. But before you give away your margin, use these tips to help you defend your price.

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Review your pricing strategy

It’s much easier to defend your price if you’re confident in your pricing strategy – so make sure you’ve done your due diligence when setting your pricing. That means being clear about how much profit you want to make, your costs, and how much the market will pay for your product or service. 

Understanding your break-even point is a good place to start. Use our calculation to help you work out the minimum income you need to stay in business.

Point out your added value

Talk to your customers about the key benefits of your product or service, and why they should choose you. For example, to customers who are price shoppers (‘cheapest is best’), you could explain there’s more to a product than price alone, such as quality, productivity, guarantees and warranties, faster delivery, and free installation.

Come up with a package of advantages that distinguish your product or service from the competition, and train staff to use this bigger picture. Explaining this added value can help ensure price is not an issue.

Find your customers’ pain points

This is similar to the point above, but it looks at the added value you offer from another angle.

Customers have concerns other than price. If you can find their pain points – and ease them – they’ll often be willing to pay more.  For example, people are often frustrated if an electrician doesn’t turn up on time. Could you convince customers it’s worth paying a higher price with you if you can guarantee that you’ll arrive on time – or it’s free?

Similarly, they might be annoyed at pushy sales tactics in salespeople or find the fine print stressful.

If you can find and solve those pain points – whether it’s providing a lifetime (or a certain period) warranty, or leaving the job tidier than when you started, your pricing will become much less of an issue.

Differentiate yourself from online competitors

It’s increasingly common for people to visit retailers to inspect a product, then buy it online at a better price. Or they may ask whether you can provide a similar product for the same price (or lower) as an online competitor. Here are ways to approach this.

Tackle the problem

Focus on the worries and issues people have with internet purchases – and show them how your product or service is superior. This is particularly important if you don’t have an e-commerce store. Will the competition’s product turn up in the condition you expect? Will it be delivered quickly and on time? If it breaks, how easy is it to sort a replacement?

You can also point out the disadvantages of purchasing online, such as not being able to take their purchase home that day.

Shift the focus

Refocus the conversation from price to the advantages of buying directly from you. For example, tell them about positive feedback you’ve received from other customers. You might have a loyalty programme that rewards customers with discounts, free samples, or access to special events, or perhaps your packaging is premium, unique, and collectible. 

Stand your ground

Whether you discount your price or not will depend on a number of factors, such as how important the customer is to you and the likelihood of ongoing business from them. However, before you decide to offer a discount, remember that:

  • By not budging on price, you might actually reassure your customers that you’re the right business to deal with. This may seem counterintuitive, but staying firm shows conviction and self-belief in your product, which can be powerfully convincing.
  • If you can’t reassure your prospective customers, don’t automatically offer a discount. Customers who are focused solely on price may not be very loyal if a competitor undercuts you. They may also not be particularly profitable, so consider whether it might be better to focus on other customers.

Stay cool

If a customer challenges you on your price, don’t take it personally. It’s human nature to look for the best deal. Explaining why your product or service is worth the price in a professional and friendly way will go a long way towards winning people over. It’s also a good exercise for you because it forces you to really think about what makes your business unique.

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