One of the most important things you can do for your business is to develop a Competitive Strategy. Having a Competitive Strategy means that you are taking a close look at the competition. This is not for the sake of comparison and seeing how you and your business measure up. Don’t get caught up in that madness, nothing good will come of it. Instead, stay focused. Your review of the competition has a solid purpose. You need to know what they do, how they do it and what sets you apart. This is key to your company’s success. Today we are going to look at different ways a business can compete.
Build A Client-Centric Buisness: It is the single best thing you can do as a small business owner or solopreneur. Research has shown that client-centric businesses are up to 60% more profitable. A client-centric strategy puts your clients at the center of your business. Every decision at every level of business gets filtered through that lens. What is best for our clients? How does this impact our clients? How can we improve our clients experience?
Build A Brand: as opposed to building a business. What most people don’t realize is that branding is so much more than a logo and visual identity for your business. Branding is a deep understanding of your business, your business goals and objectives. It’s an analysis of what you do, how you do it, understanding ideal clients, your market and how to create demand.
Unique Value Proposition: What is different about your business, your products/services, and/or your how you do these things? Why should clients choose your business? How does your product/service solve the problem better than the competition? How does your product/service provide more value than the competition?
Differentiation: What sets you apart? What is your unique and memorable way of doing business?
Position yourself: as an industry expert.
Partnerships: Create a partnership with a like minded business. Cross promote one another, collaborate on special offers
Get Specific: Narrow down your niche. Be the solution for a very specific market segment. It doesn’t have to be a large segment for you to make a powerful and meaningful contribution.
Combine the top two strategies and Create A Client-Centric Brand, you won’t be sorry!
Pricing Strategy for small businesses and solopreneurs is an important topic. When it comes to looking at pricing and many other aspects of your business its always good to remember, what attracts some people will repel others. That’s okay you’re not in business to please everyone. This is where understanding your target market/ideal client is so very important.
Cost Plus Pricing: Calculating costs, plus marking up a percentage for profit. This is one of the most common pricing strategies in the retail market.
Competitive Pricing: Setting prices based on what the competition charges. Another common pricing strategy, but one that best for pricing identical retail products such dish soap.
Premium Pricing (Higher priced than the competition): The product/service has a distinct competitive advantage. Great effort is made to provide clients with a superior experience. Everything from the promotion to the packaging is luxurious and high quality. Why? Perception matters. Prospective consumers must believe that it’s worth paying a premium for.
Penetration Pricing: Marketers use penetration pricing to gain market share, offering their products/services at a lower price than competitors. This allows them to raise awareness of their products/services. At the same time giving consumers a compelling reason to buy their product and to try it out. This often results in losses for the business at least initially. Once they have met their market share goal they raise their prices to a profitable level.
Bundle Pricing: Selling multiple and similar products together at a lower price than if purchased individually. This increases perceived value in relation to the price point, creating an offer too good to pass up. It also helps to get products that are not selling well off the shelves so new and hopefully better selling products can use the shelf space.
Price Skimming: Little to no competition for a new product/service means high pricing. This is often done to help to offset Research & Development costs and allows businesses to maximize profits until competitors join the market. Prices are then dropped to compete.
Psychological Pricing: is an Awareness and understanding of human behaviour, and our purchasing habits: Is combined with understanding how the brain processes information. The result is a pricing strategy that works. It inspires consumers to purchase based on emotion as opposed to logic.
Value Based Pricing: This pricing strategy is commonly used for pricing services.
Hourly Cost + Perceived Value of Service = Price of Service
When looking at the cost per hour portion, don’t forget to consider the following:
This becomes your base price. Next factor in the value of the service being offered. This can be challenging, because some things you can’t put a price on. However, people have a limit to what they are able to and willing to spend regardless of how life changing the experience is. Knowing your ideal client is key when it comes to knowing what they are willing to spend on the products and services you offer.
Economy Pricing: Low Price/High Volume is a pricing strategy used successfully by large companies such as Walmart. They can negotiate best wholesale pricing due to volume purchases. Smaller businesses simply cannot compete. While this pricing strategy is not recommended for small businesses and solopreneurs I have included it so you can see the full spectrum of pricing strategy options.
Choosing the right pricing strategies for your business is important. A combination of strategies for achieving different objectives should be considered when practical to do so. Pricing is very much a strategy and is a key component of any Business Plan.
Note: The psychology of pricing tells us much about human purchase behaviour, and consumer perceptions. Honestly, ignoring this research would be a costly mistake for any business. It’s a topic that you can be sure we will explore deeply over time at Drunk Squirrels.
What is a Business Model?