Sustainable pricing

Published 01/12/2021
 
If we’ve learned anything from 2020, it’s that we are not only all in this together, but that to thrive, we have to work together and look out for each other. Sounds right. Now, add to the mix the fact that your business needs to make a profit. This is where it could get a little dicey. If we are looking out for and supporting one another, then what should that profit look like?
 
According to an article on pricing, published in Inc. and written by Elizabeth Masserman, when determining what to charge for a product or service, there are three approaches. The first is cost-plus pricing, which is basically direct costs, indirect costs, and fixed costs, plus your desired profit.
 
Another way to price your service is to look at what your competitors are charging. Of course, competing on price alone can be quite tricky because your costs may be different from theirs’. Depending on your overhead, staffing, new or old equipment, etc., your fixed costs could be wildly different. Also, your product or service could be much better and you need to place value on those differences. Before you do this, you need to be able to clearly communicate what those differences are and why the added cost is worth it.
 
The final way to price your service is “perceived value to customer”. This is less objective and more subjective, and also based on what the customer is willing to pay and how much they need it.
 
Although the first two pricing strategies are somewhat predictive, the last one is where we need to careful. We obviously want to be paid for the value of our work, but we don’t want to use the customer’s need unfairly. To the average person, a fire extinguisher is worth maybe $30. To someone whose kitchen is burning, it’s worth a lot more.
 
I think it’s fair to say that if you are in business, you’re pretty emotional about what you do. You love it, you worry about it, you rejoice during success and get down when you fail.
 
Robert Plutchik, professor emeritus at the Albert Einstein College of Medicine theorized that there are 8 basic emotions. Aristotle teachers that there are 13. Darwin lists at least 30, while an academic study from the University of California, Berkeley identifies 27 discrete emotions.
 
Nowhere is greed mentioned as an emotion. Although philosophers disagree as to whether greed is an emotion or a character trait, many agree that it is an act of will and a habit formed through constant repetition.
 
In fact, in Psychology Today, Neel Burton, MD, explains that “…without some measure of greed, individuals and communities are more likely to run out of resources, and to lack the means and motivation to innovate and achieve, making them more vulnerable to the vagaries of fate and the designs of their enemies”.
 
So, is greed a good thing? Does greed help civilization advance and survive? It’s obviously impossible to say definitely, but I think we can all agree that greed can be corrosive and damaging. The desire for safety, security and protection against scarcity is important to all of us. However, when we exceed these basic requirements, we are harming our brand and society as a whole. We can obtain these things without becoming greedy, but rather by working together, supporting each other, and providing our products and services at a fair and sustainable price.
 
At ASN, we continually strive to provide top-notch service at the best price possible. We understand that when we work with you fairly and honestly, we all profit and come out ahead. To paraphrase Mark Twain, being an honest business is the best way to be a profitable and enduring enterprise.
 
Although there is light at the end of the COVID tunnel, it’s still a long way off. We have all stepped up to the plate and supported each other. We need to continue to do this long after COVID and 2020 is a distant memory. At ASN, that is our pledge to you.