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Pricing vs. Charging: is there a Difference?


Illustration by Richard Mia

Illustration by Richard Mia


In the world of business, the words ‘pricing’ and ‘charging’ are often tossed around interchangeably. 

 

But I believe they’re more like distant cousins than twins. Let’s dive in and uncover the real difference between these two crucial aspects of running a business.



The master plan

 

Pricing is like the master plan, the grand strategy of your business. It’s not something you decide on a whim. It takes research, planning, and a good amount of brainpower.

Think of it as setting the stage for your products or services in the marketplace. It’s about determining the value you want your customers to see in what you offer.

 


Where the rubber meets the road


Charging, on the other hand, is all about tactics. It’s about the day-to-day decisions you make to bring in the cash. Whether you’re offering discounts, setting flat rates, or adjusting prices based on demand, charging is where the rubber meets the road.

 


Let’s look at an example


Imagine you’re in the market for a bean-to-cup coffee machine. It’s the first time you’ve bought one, so you’re both excited and nervous as you speak to the sales person. The sales person listens to your needs and presents you with three options: one priced at £1,500, another at £1,000, and a third at £500. He tells you that the £1,500 machine on special offer, slashed to £750, because the manufacturer is about to release a new model. 



Which one would you choose?

 

Most of us would probably go for the £1,500 one, even with the discount, because we usually associate higher prices with better quality. This is where pricing comes into play. 

 

So, why does this matter? Well, as a business owner, how you price your products or services sends a message about how you value them. It’s not just about making a healthy gross margin; it’s about how you decide strategically to position your brand in the minds of your clients or customers.


As a general principle, positioning pricing strategies fall into three choices:


  • Premium: e.g. Armani, Rolls Royce, Rolex, Apple.

  • Mid-range: e.g. Next, John Lewis, Android phones.

  • Cheap: e.g. Ryanair, Primark, Ikea.


Positioning is all about managing how you want the market to perceive your brand. Here’s a story about an experience I had with a company that has Premium positioning.



Think before you discount

 

But what about charging? Shouldn’t you just lower your prices to attract more customers? Not so fast. While discounts and specials can be tempting, they can also dilute the perceived value of your product or service if overused. 


It’s like watering down a fine whisky—it loses its punch.

 

Be careful about when and why you offer discounts. Maybe it’s to clear out old stock or to reward loyal customers. Whatever the reason, make sure it aligns with your overall positioning pricing strategy. Think about what message you’re sending to your clients or customers. How does it fit into your overall game plan?



Get the balance right

 

The key takeaway here is balance. Pricing is your big-picture strategy, while charging is how you implement that strategy day in and day out. They work hand in hand to drive your business forward.

 

In other words, pricing and charging are like two sides of the same coin. 


When you strike the right balance between the two, it supports you in creating a solid, sustainable business.


If you’d like to have a conversation about transforming your company, I'd love to hear from you. Just fill in your details here and we can arrange to speak.

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