Flexibility and pricing; behind closed doors

Starting a business can be an incredibly exciting prospect. The chance to experience flexibility and to earn a substantial income at the same time, are just a few of the doors that will open.

This is not to say that every aspect of running a business is plain sailing. Many start-ups make some glaring errors, right from the word go. They may seem miniscule to you at the time, but many have long lasting consequences. Being too flexible with pricing is one of these errors.

Leaving the door ajar
The majority of business owners will give their closest friends and family discounts; there is nothing wrong with that, and they could result in some great referrals. It is important to have a clear idea of who these people are (it is pretty obvious with family) from the beginning.

As a business owner networks within their industry, they will pick up new friends. Some may even find that the majority of their business comes from their friends, or their friends-friends. What started as a simple gesture of goodwill has soon turned into working long hours, for very little pay; everyone expecting a discount. Whether you produce guest posts for online businesses, or own a florist, you have got yourself in a rut!

Where does it end?

Closing the door
Select the people that get a large discount; family and close friends. After this point, close the door, and don’t let anyone else in.

What’s in the filing cabinet?
This is not to say that different pricing tactics should not be implemented; quite the opposite in fact. Have a clear pricing structure on file, for all other customers. This may vary dependant on the aim for a particular product in the long term, or the demographic/purchase ability of a customer.

Other discounts should be related, but not limited, to pricing strategies such as:

• Loss leaders – marketing products at, or below their cost price to attract new customers
• Second degree price discrimination – charging high per unit costs for smaller orders, and vice versa
• Penetration pricing – marketing products at a low rate, to increase market share

The importance of prices; behind closed doors
Most people are acceptant of change, regardless of what others might think. What people are not acceptant of is change that has a negative impact. Setting solid pricing strategies from the word “get-go” means that there are not going to be any surprises for customers in the future.

Instead of coming to the realisation that prices are too low in later on, just set them at the right level now. This won’t just make things easier for the business owner, but it will ensure that customers don’t go elsewhere when they realise that the value for money they thought they were getting, is no longer there.

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