I recently had an eye test and contact lens check-up at my opticians. While I was there I decided to order some new lenses, even though I knew they would cost more than my online supplier. The total cost was £180, which seems a lot but I went ahead and ordered them anyway. When I checked what I had previously paid for identical lenses online, I was shocked to see that they were only about £60! I think this is an excessive premium to pay and I will probably use another optician in future, I felt so ripped off by this.

The lesson from this is that whatever your prices are, you must avoid your customers feeling the way I did after buying my lenses. With price comparison apps etc. these days, you should assume that your customers are fully aware of what the online price would be even while they are in your shop.

These are the reasons why I have been willing to pay more to buy offline in the past:

1. Because I can get it immediately without waiting for delivery – e.g. food!

2. Because I can see/touch it before I buy, to make sure it is what I want, e.g. the right size (for example, shoes).

3. Because I am loyal to the company that is selling it – e.g. a camera I bought from John Lewis who are employee-owned (as are K&H, to a lesser extent).

4. Because I know there is a human being in a physical shop I can call upon if there is a problem or if a replacement is needed – e.g. an audio system I bought from Richer Sounds last year.

5. To avoid the postage cost and delay if it needs returning- eg shoes that were the wrong size!

6. To avoid the wastage of excessive packaging that would be needed to ship delicate/fragile items – e.g. some Udo’s Choice oil that came in masses of bubble-wrap and a huge box.

7. Because some people enjoy the whole experience of shopping (not me, though).

8. To avoid delivery charges – e.g. CDs, although I think that some, including Amazon, now don’t charge for delivery…

9. …and risk of non-delivery, or difficulty physically delivering large items when no one is home – e.g. a poster I bought online that didn’t come.

10. Perhaps most importantly for me, though, is this: because the shop assistant’s advice is very valuable, and I would feel guilty taking that advice without giving something back – e.g. anything for my bike that is even the least bit technical. I suspect this is something that correlates to affluence, so if what you sell is up-market, this will be more important for you.

If your business competes with internet-based rivals, make your customers aware of the reasons why they should pay more to you, using reasons such as those above. Turn these into features/benefits of what you do.

The other option is, of course, to start selling through the internet yourself, either instead of or as well as your offline sales, but take care with your differential pricing to avoid my contact lens scenario above!

Can you add to my list above, or offer any other advice? If so, please post a comment.

For several years now I have been in the privileged position of getting to know many of our clients’ businesses on an intimate level.

For every single client I have worked with in this level of detail the same single factor emerges as the key determining factor of profitability – the way that they price their goods and services.

Why pricing is so important?

1. The extra income from each sale goes straight to the bottom line for most businesses.
2. It provides an automatic filter to deter non-ideal customers from wanting to work with you.
3. It is essential that every business outgrows the instinctive urge to take on any work at any price, which is very often what they had to do to launch the business in the first place.
4. When you have a good pricing system it is much easier to accept (psychologically) the more frequent rejections that are likely to follow from higher prices. 
5. One of the unexpected reasons is that it forces the business to improve the standard of its service level to justify the higher price. This tends to automatically take you “up market” or into a niche area, which is where the most profitable small businesses operate.

 Please leave a comment with your thoughts and stories of pricing successes (or otherwise).

 To read what the E-Myth blog has to say about pricing, have a look here.