Workshop
While many businesses have increased their prices in line with spiraling costs, some are decreasing them to stay within customers' shrinking budgets. Dropping prices can be a great way to resuscitate sales and make you think creatively about your products. However, getting it right is crucial, otherwise the drop could eat into your bottom line. We spoke to three brands that took three different approaches to decreasing their prices.
Penetration pricing
Sustainability-focused sportswear brand Presca has pivoted its business away from high-tech (and high-end) cycling vests toward T-shirts and accessories that act as an entry point into the brand. ‘We've moved the bulk of our focus to creating attractive variations of the lower-cost garments that we know sell well,’says Lily Rice, creative director. ‘We hope that this will continue to be an access point for many of our customers, who can then choose to also purchase our more finessed pieces.’ This is an example of penetration pricing, where a business reduces the price of a new item to break into the market.
Value pricing
Polina Karbanova, founder of craft sewing store Good Fabric, reduced her prices by 20% because trade had slowed down so much as a result of the cost of living (as well as summer holidays distracting customers from sewing). ‘I definitely got a lot of orders. It was as predicted and it got me out of the red,’ she says, ‘I feel like, at this point, if lower prices and reducing margins means not drowning in invoices, then I'll take it.’ This type of value-pricing strategy focuses on how your customers value your offering, with external factors (eg, a potential recession) in mind.
Bundle pricing
Bundling means selling two (or more) products at a lower price than when bought separately. Restaurant chain Pizza Punks thought that the UK government wasn't doing enough to help people fight the rise in the cost of living, so it decided to roll out some ‘inflation-busting’ deals for its customers. These include bottomless brunch for £31.50 and Cheap Date Monday, where diners can get two pizzas and two beers for £22. ‘With people going out less, we're trying to add more value for customers when they do, while also protecting our margins,’ says Brad Stevens, founder of Pizza Punks. ‘The results have been phenomenal.’
A version of this article was published in the Courier Weekly newsletter. For more useful stories, tips, tricks and simply good advice, sign up here.
