Pricing is a Feminist Issue - Part of a new series Women in Business
Pricing is a Women's Issue
The prices we charge in business often reflect the way we value ourselves. Our prices are too often a measure of our own self esteem and self worth. Pricing is fundamentally a measure of your confidence as a business owner and it's the only validation of the value you provide to your market.
There is a tendency for women to undercharge for services and products sold. As if to say, "If I charge a low price you will like me more", "I will not get into unpleasant scenes of customers or clients haggling with me on price.
There is the also the fear factor, will anyone buy my products or services at all? If I under-price I am more likely to sell. But you have to eat as well and you have to add a reasonable profit to survive in business. If you can't price your products high enough to run a legitimate business, you've either got to grow your confidence, change your products or services range so you are providing that value, or get out of the business as you will not survive.,
In the services sector women professionals tend to charge less than men for the same work, women tend to focus on the relationships with their clients. Women are often more flexible on price and charge needier clients less than those in a better position to pay. Men tend to set prices regardless of the circumstances of the client.
As women are often socialized to please others, they also project this to pricing and think in terms of pleasing the customer rather than thinking in terms of worth of the service or product in the eyes of the customer. And while customer focused orientation is critical in a business it can not be at the price of your businesses survival.
How to Approach Pricing
The way you price your products or services depends on a number of factors including the
Your long term strategy
Costs are important. Once costs are known they provide a reference point for assessing profitability and enable you to see whether or not the expected return is satisfactory. When assessing costs figure in fixed ( those that remain the same whether you are selling or not e.g. Rent) and variable costs those that change
Often demand for a product is not taken into account when prices are set. Remember customers buy benefits i.e. the benefits that acquiring the product will bring
- What special benefits do customers get by buying my/our product?
- What are these benefits likely to be worth to them?
- What might they be prepared to pay for these benefits?
You don't have to undercut everybody to break into a particular market. If the lower price sector is crowded already, it may well be better to aim for another part of the market altogether - provided, of course, that you adapt your marketing plans and budgets accordingly.
Long Term Strategy
Pricing reflects where the company positions itself in the market place and where it aims at developing part. Your pricing and company image need to be consistent. You can sell up market hand bags at very low prices, or position your self as an expert in the health services and under-price.
There are three principal ways to price;
Mark Up Pricing
Here you take all your costs into account an you decide on what profit margin or percentage you want then you put your profit on top of your costs and that is the price you charge whether it is wholesale or retail.
Mark up pricing is too commonly used as it is easier to think of the arithmetical side of pricing rather than to think in terms of the value you are bring to customers. It is a mistake to be cost oriented in pricing
If you are producing a unique product or service, you can afford to think of the value you are bringing to the customer or client, and the value they see in the product
Going Rate Pricing
Pricing based mainly on competitors prices, method used where there is a low perceived differentiation between competing services
It is easy to fall into this trap. Women may say well every one is charging this so how can I be different. The real question is how to offer or package your offer in a different way so customers and clients do perceive a real differentiation and there is therefore more allowance for price elasticity and greater perceived value.
It is important not to undervalue your products or services and most importantly your self. However don't think that in warning you against undervaluing your product or service, I'm urging you to charge whatever the market will bear. The goal is to find the right price, meaning a price that (1) reflects the true market value of whatever you're providing, (2) allows you to earn enough gross profit to build and maintain a healthy business, and (3) doesn't leave you vulnerable to competitors (4) a price that you feel comfortable with