Reasonable Control Over the Price
If a customer has to buy too much, too often or in inconvenient units to get a good price, your pricing policies simply do not engender trust. Customers should have as much choice as you can give them over the final price or the amount of goods or services they want to buy.
Good examples of businesses that provide customers with a high level of control over pricing include:
• A car repair garage that phones the customer before installing an unexpectedly high-priced replacement part.
• A hardware store that sells nails by weight as well as by the bag.
• A laundromat that has washers and dryers in several different sizes so that a customer with a small load doesn't have to pay for a large one.
• A printer who tells the customer that preparing a page layout that can be put on a larger press will mean a lower unit cost.
• A bike repair shop that takes the time to show customers how to make their own routine repairs.
• A natural foods store that gives customers credit for recycling peanut-butter tubs.
• A lawyer who encourages people with a self-help bent to do a portion of their own work on routine matters and discounts the fee accordingly.
• A picture framing shop that has a facility for customers to do their own framing at a reduced rate.
Your pricing goal should be to give your customers maximum choice of sizes, amounts, hours of time purchased and so on—consistent, of course, with the sensible operation of your business. For example, if someone asks for plain ice cream rather than the "Strawberry Delight" you have on the menu, you may make a loyal customer if you not only serve the ice cream without the fruit sauce, but also subtract an appropriate amount from the bill.
A good example of a business that offers flexible pricing is Sonoma Compost in Petaluma, California, which provides premium quality compost and mulches made from recycled organics. It has a very clear written pricing policy and offers a wide variety of mulch. The customer has complete control over the pricing and can order as little as 1 to 2,000 yards, with generous discounts for the larger amounts. Sonoma Compost is located at the county landfill and "recycle town." As a bonus to its customers, if you bring your trash or recyclables in you get a 50% discount on up to five yards of screened organic compost on that day. This "bring a load . . . take a load" offer is very popular.
Bad examples of pricing situations in which the customer is treated with little respect include:
• Lunchmeat packaged only in large amounts.
• Undertakers who promote super-fancy, overpriced caskets and keep the reasonably priced ones out of sight, and when asked for the "plain pine box" wrinkle up their noses and attempt to make customers feel cheap and uncaring.
• Service businesses and professionals who bill a half-hour for a five-minute phone call without making this incremental billing policy clear to clients before the fact.
• Appliance repair businesses that charge an arm and a leg to come and check out a problem, even though you have already accurately diagnosed it.
• A car rental company that, instead of prorating by the hour, charges for an extra day when you keep a car an hour or two too long.
A Different Pricing Mechanism: Online Auctions
The Internet has provided the opportunity for individuals to be sellers in a large market, particularly with the growth of online auctions. In the last few years, auction sites have become enormously popular as garage sales and flea markets have migrated online. Besides allowing sellers and buyers to bargain over prices, selling items by auction also offers entertainment value. Case in point is eBay, a lively online auction that has succeeded in large part because it has figured out how to form an online community.
For small businesses, auctions can be an opportunity to obtain publicity for their products and services. By auctioning off a few examples of their product or service online, the business can not only generate sales but gain exposure. This strategy is not new; it has been common since the mid 1970s for businesses to donate products and services to be auctioned at charitable events. Such price-entertainment activity can be useful publicity.
One caution is worth considering. In the 1990s the term "commodity" came into use with a specific meaning: a product or service that is so standardized in quality and performance that it can be industrially produced and replicated. The word has a negative connotation because it means that the lowest cost producer will be the most successful in a business dealing with a commodity. You can unintentionally make your product or service appear to be a "commodity" by offering too many samples in auctions. If your product or service does become perceived as a commodity, you will be faced with other entrants in the market who will aim for the lowest cost of production.
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