Why pricing can be one of your most powerful marketing tools

For anyone who has studied marketing, the 4 P’s is pretty much lesson one – PRODUCT, PLACE, PRICE, PROMOTION although there have been a few more P’s added in more recent years to make it 7 (PEOPLE, PROCESS & PHYSICAL EVIDENCE).

But if you are in business and are not trained or experienced in marketing, often the most obvious thing to concentrate on is PROMOTION and think that is what marketing is. In this blog I want to put forward the case for poor old PRICING as a marketing tool and not just a factor of costs and margin.

So how can you use price as a SME business to more effectively market your brand or business?

Price Architecture

Fancy words – but it is happening all around you. When you go into a supermarket and they have their value pasta, own brand pasta, branded pasta and fancy smancy fresh hand-crafted pasta you know there is a price difference (and also usually a quality difference) so you make the decision whether your Tuesday night Spag Bol is fine with value pasta but for a anniversary meal night-in you might splash out on the fresh premium product. That is pricing architecture – having distinctive offerings at different price points.

So as a business, even if you are offering a service, can you provide price architecture?

Can you offer a basic product or service and a premium or enhanced one? Ultimately it will give you more choice for your customers, allow you to up-sell and also possibly target different markets.

Using entry level pricing

Word of warning on this one – this does not mean price cutting or getting into price wars with competitors. I speak to lots of small businesses and often hear the lament that people and businesses ‘just haven’t got the money.


People are price sensitive about certain things and not about others, that is why brands exist. Ask someone why they bought s specific car brand and not another and you realise that despite what they may say about ‘quality’ and ‘performance’ actually there were far more emotional reasons why they may pay over the odds for one brand over another.

So the trick is to understand which of your products or services your customers are price sensitive about and which they are less so. You can either move out of the prices sensitive market or price some of your products or services at this keen pricing and allow others to have higher margins.

Again looking at the supermarkets, they are very clever at this and know that people are aware of the price of key items like bread, milk and bananas are keen as mustard on the pricing of those. They also know that as shoppers we will quite happily put a highly priced ready-meal or premium product in our trolley without batting an eye.

Postage and packing

This only applies to mail order and online businesses but you need to be very clear about your P&P strategy and what it says about your business. P&P is something that people accept but really hate. But there is a cost attached to the business for packaging, labour and postage or courier charges, so you have t pass them on, but there are clever ways you can do this.

If your product range isn’t very price sensitive, you could get away with loading the price and offering free P&P. Be warned though that once given free, it is very difficult to charge going forward.

The way most e-commerce / mail order companies do it is to charge a nominal P&P fee up to the threshold they feel their customers will stand (and depending on the nature of the goods – a dress or a sideboard!). Generally this is up to about £3.95, and the rest is absorbed in the price.

The beauty of charging P&P for marketing is that free P&P can then be used as an incentive or offer.

  • Free P&P for orders over a certain value (set to increase average order values)
  • Free P&P for orders placed before a date (Bringing sales forward)
  • Free P&P on certain ranges (encourage customers to shop deeper within your range)
  • Free P&P on your next order (encourage early repeat orders)
  • Free P&P to customers who haven’t ordered for a while

…. you get the idea!

Use price comparisons

Putting pricing into context can also be used as a very powerful marketing message.

Again it is not just about being the cheapest, it might be about proving your value, so think if any of these scenarios could be applied to your business –

  • Are there ‘no hidden extras’ in your pricing?
  • Can you offer flexible payment plans or terms?
  • Can you offer customers the choice through menu based pricing so they can choose the services or features they want and are willing to pay for?
  • Can you demonstrate price savings over time i.e. a monthly fee versus pay as you go?

Pricing as a point of difference

Sometimes a pricing strategy is actually one of your marketing points of difference. Think about companies such as

– Direct Line who claim cheaper insurance prices because they cut out the middle man

– Stella Artois and their ‘reassuringly expensive’ stance

– Money Supermarket whose whole purpose is to save you money

So the next time you think about your marketing strategy, spare some time for poor old pricing and give it a chance to work a bit harder for your business.