The unique selling proposition
Fundamentally, this is what makes you different or better than others out there. Your unique selling proposition will usually contain one or two features that stand out as being different from the competition.
There are a few approaches you can choose, when setting a pricing strategy. The most commonly used approaches include the Boston Matrix and the Ansoff Grid. For this example, we’ll focus on the Boston matrix.
The Boston matrix entails plotting products, including yours, across a matrix. This shows you where your products are priced and perceived in relation to other competing products.
Within the matrix products are split by:
- Stars – High market growth and high market share
- Questions Marks – High market growth and low market share
- Cash Cows – Low market growth and high market share
- Dogs – low market growth and low market share
Within the matrix, your pricing should follow basic principles. If your business has low market growth -- there’s not much competition out there -- and high market share, you may want to consider premium pricing, relative to your competition.
Alternatively, if your business has low market share in a fast-growing market, then you may want to consider a lower pricing model to encourage people to use you and grow your market share.
Pricing your product/service
Your product pricing really comes down to performing good due diligence. That means ensuring that you’ve done your research within the market, you’ve understood what customers are willing to pay and you’ve calculated your costs. You want to be sure that you’re recovering your costs and pricing your product relative to what people are willing to pay.
If you get all these elements right and you provide a good service, then you should ask your customers if they feel you’ve given them value.
The best way to measure value is simply by asking your customers what they expect for their money and whether they’re getting this from you.
Value is usually measured through surveys or feedback forms. Here at Goody, we utilise net promoter scores when judging value.
Remember value isn’t just an indication of price. It’s a culmination of factors usually made up of your product, promotions, branding, perceived value, and service.
Promoting your product
Promoting what you have is necessary if you want to expose your brand and attract customers. Small businesses rarely have money set aside for promotions. But promotions can be incredibly useful to increasing your stock turn -- how much inventory you’re converting -- and increasing your recurring revenue (if you’re hosting promotions over a set period).
The key to any good promotion is ensuring you’ve answered these questions:
- I know who I want to be targeting
- I know how I can send information to them
- I know they will react to my promotion
- I know what the anticipated reaction to my promotion is
- I am allowed to send this type of information to them
If you get all this right, then you should see results.
Here are a few promotional ideas, you might like to try:
- Social media promotions
- Email campaigns
- Product giveaways
- Point of sale promotions
- Customer referral programmes
- Customer loyalty programmes
- Charity donations
- Direct marketing – mail outs and letter drops
- PR activities
*Facebook Promotion Example
Budgeting for your marketing
Despite what people may say, budgeting for your marketing is actually really simple. All small businesses really need is an excel sheet that outlines your tactic estimates and your actual costs. These are usually split by marketing activity e.g. Sponsorships, events, advertising, PR etc.
Having a solid plan and budget is one thing. Being able to execute your marketing plan effectively, is undoubtedly the hardest part. That’s because small business owners are time strapped and have limited resource. Executing your marketing plan, usually takes a lot of time, planning and communication.
Here at Goody, we encourage the use of a marketing calendar, to clearly plan out the steps involved in your marketing plan.
Utilising a marketing plan also ensures that your staff is involved with everything that’s going on in your business.
There are hundreds of marketing metrics you could be tracking and it’s easy to get caught up in metrics that add little value. You don’t need to spend thousands of dollars on social media campaigns, websites, and banners if it won’t clearly yield an increase in sales.
*Remember correlation, doesn’t imply causation – but here at Goody, we’re firm believers that if you’re spending money on something and it’s not delivering a result, then you need to rethink your strategy.
You should ideally be tracking:
Sales - split by new customers versus returning customers
Sales are the lifeblood any business. Without the cash register ringing, you won’t survive for long – it’s a fact of business. If you can split this information ie. sales driven by your new customers versus your returning customers, then you will know where the majority of your money is coming from.
If you’re constantly trying to acquire new customers, then you may have a customer loyalty issue. If you’re finding that most of your sales are driven from returning customers, then you may not be promoting your business to new customers.
Tracking your expenses versus your sales will give you an indication of how effective your marketing performance is. This makes up what we call your cost to acquire (CAC). Businesses which have a high cost to acquire a customer may suffer from a retention issue if their customers aren’t returning to purchase more. Ideally, you want (CAC) to decrease over time, and your customer retention to increase as your product, service and offering get better.
Average Revenue Per Customer
This is a measure of your total revenue divided by the number of customers you have. The idea here is that you want your average revenue per customer to keep increasing. This is a sign that people are buying more from you and the total transaction amount it getting bigger. There are many ways you can increase your average revenue per customer. The easiest way is simply to increase your price – but that usually has a negative impact on your sales volume.
This can be a really interesting measure you want to keep track of because if you can increase your average revenue per customer by 10%, simply by upselling, providing add-ons or utilising smart promotions, then this has a compounding effect across your entire customer base.
The cost to acquire a new customer.
This is an absolute must for all marketers to understand. Understanding your cost to acquire a new customer will help you create better marketing budgets and where you should be marketing.
Your cost to acquire is simply measured by how much you spent on your marketing activity divided by your new customers, over a set period. This gives you your cost to acquire those new customers.
Learn More About Goody’s Customer Loyalty Platform:
Goody is a revolutionary new way to help good businesses, keep good customers returning. Goody is a universal loyalty programme, that replaces the need for traditional punch cards with a fun and unique rewards programme, personalised for each business. Customers can use a physical card, iPhone App or Android App to scan in on the provided in-store tablet and earn points at every store Goody is accepted. Goody helps give businesses simple tools, to improve their relationship with their customers. Book a demo today!