Pricing your Products or Services

What is ‘price’?

 The value placed on what is exchanged¹

¹Gourville, J and Soman, D. (2002) Pricing and the psychology of consumption, Harvard Business Review

And it’s complex  Trains         

Peak Off Peak Super off peak Season tickets (various) Saver tickets (various) Rail cards (various) Class Packages (travel cards etc) Sale prices

 Why? And then you have to factor in and balance your social purpose. = More complex

How does your pricing fit?  Business objectives and mission  Cover some costs with trading  Break even  Generate a surplus  Marketing and marketing objectives  4 p’s – Product; Price; Place; Promotion  Pricing strategies

Considerations for a Social Enterprise  Social Mission / Purpose

 Balancing making a profit against social purpose  Mindset of ‘Not for Profit’ v ‘Social Enterprise’  People are willing to pay more as you are a Social

Enterprise and they want to support you?  Size of your market – economies of scale, choosing who you work with (wave)

Your approach  How do you price your products or services?

 Do you regularly review your products or prices?

Pricing strategies

Source: http://www.marketingteacher.com/lesson-store/exercisepricing.html (accessed March 2013)

Premium Pricing  Consider who your customers are and what you are

offering.  Why use Premium Pricing?  Because you are offering a premium product to customers who can afford it.  Consider this if your business model is taking the money from those that can afford it and using the profit to develop the social purpose

Penetration Pricing  Based on where you are in the business or product life

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cycle Often used by start ups to gain market share Could be used to promote new products or services to gain market share Need to be careful to consider increasing prices in the future Be very sure about your costs and that you can afford to do this, especially with regards to cash flow

Economy Pricing  May appeal to Social Enterprises as it may be felt there is

a need to offer value for money to those that can’t afford high prices  Need to be very cost conscious and keep these to a minimum  ‘No Frills’ – Tesco Value  Ryan Air et al – but there are options for add ons and also first few seats are sold cheaply.

Skimming  This is done when you can get away with it!  It is about skimming the cream off the milk, taking the

most profit possible while you can because you have the market cornered.  Example, band releases new album at full price, sells it skims a big profit and then reduces the album as the sales reduce  Can you use this in a social enterprise model?

Other pricing strategies  Psychological: packages – people will often opt for the

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middle price until they get to know you and your offer. Perceived price point – 99p v £1.00 Optional product pricing – premium or skimming Captive pricing – used to be buy a car from a main dealer and you have to get it serviced by them (often at a premium price) Promo pricing – bogof, bundles etc. (22 on Wikipedia!)

How do I know which one is best to use?  Your mission, social purpose and business objectives  Fixed + variable costs + social costs 

Set your absolute minimum to cover costs and achieve your social purpose

 Market research, analysis and testing

 Review your target markets and what they are prepared

to pay, taking into account: 

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Value Competitors pricing Your competitive advantage

 Consider what pricing strategies are best suited to your

business  Variable pricing strategies can be beneficial when you are working with different customer groups.  It can awaken dormant customers if communicated well (another P – promotion)  70% of social entrepreneurs take an informal approach¹

¹Social Enterprise Survey, Southern California CA assoc. of Non Profits 2009

Tips to help with your pricing  Think like your customers – were you a customer once?  Develop a value statement and link this in with your social

purpose statement – businesses don’t just buy on price  Survey your customers on a regular (6 month) cycle. The more you know about your customers the better you can give them what they want

 Always ask for feedback on why you didn’t win a contract  Regularly review your pricing strategies, at least 6

monthly, if not more often  Think carefully how you are going to communicate your prices to your customers  Make a surplus!

Recap

 Always consider your social purpose when pricing  Be aware that your costs may be higher when you are

working out your base cost or minimum price  Be aware of hidden costs that, as a social enterprise, you may not have considered;   

Additional training Using environmentally friendly products Addition consultancy work (charities compliance, accounting etc)

 How niche is what you offer – you may have very small

economies of scale  Focus on the Social Purpose when competing

Resources  www.marketingteacher.com  Oster, S (2000). Pricing in Non Profit Ventures. Non Profit Times, October 200, 1-5 (abstracted from Nazar Awan – The Pricing Challenge in a Social Enterprise )  http://www.npenterprise.net/what-are-some-good-pricing-strategies

 http://redochre.org.uk/wp-content/uploads/2012/03/SE-Costing-and-pricing-your-productsand-services-pdf.pdf  Marketing Concepts and Strategies; Dibb, Simkin, Pride, Ferrell. 2012