"Blue Stove" Pricing

Bob's Note: My wife posted a great piece on pricing today on her blog - and I thought it was so good that I've re-printed it here in it's entirety. For those of you who don't know her - Brenda has an MBA and has been doing marketing and consulting for years. This article was originally posted on Marketing FlyTraps just this morning:

How do you price things -- and keep your profit margins as plump as possible in a recession? I like to call my concept "Blue Stove" pricing.

Allow me to explain. Nordstorms - that upper crust store, aimed at selling shoes (and other stuff) to women, is smart enough to know that they need to feed us women while we shop. In the past, they have offered an excellent cafe or bistro within their stores - keeping us with in the store to eat, so we can shop again. It was convenient, had excellent food -- and while not as cheap as going outside the store -- it wasn't Soooo expensive that you were willing to drive somewhere else.

But now comes ... *dum - dum - dum* (cue the recession...) and women are watching their pennies (we want money to spend on shoes...not food).

So recently, Nordstroms introduced a "pairing" restaurant. Its called "Blue Stove". The restaurant literally has a blue stove. The "pairing" menu means they offer "little plates" of delicious food -- priced very reasonably (most are about $5* Actually, they are priced at the .95 cent mark -- this is called psychological price breaks...I'll write about that in my next blog...) and are meant to be shared. For example, a little plate of chopped veggie salad. A small platter of chicken wings - seasoned and cooked to perfection. They can be "paired" with a glass of wine - from very reasonable price ($6/glass) to more expensive($20/split of champagne).

So what, you are asking, does this have to do with pricing my software or my consulting services? Well -- in a recession, we ALL become nervous about our income. Our cash in the bank. We want a bargain, and we want to be conservative.

Your customers do too.

RIGHT NOW, you need to re-think your pricing. You need to do the following:

1. Figure out what are the top 3 or 4 things your customers buy the most often.
   
   
2. Assess how can you make the price as small as possible. (Chop out stuff, re-plate your offerings into "Tapas" or small plates!)
   
   
3. Determine how you can you make it appear as "value" oriented as possible.
   
   
4. Figure out what other things can you pair it with (e.g. - have the sales guys suggest the "chef" (the expert) says to get 2 or 3 plates and share, wine, dessert -- all these items also re-priced to recession "small bite" pricing...)

Nordstroms NEVER gives the impression that their new Blue Stove restaurant is "cheap" - but they DO reposition themselves (very elegantly, staying within their realm) as giving the customer quality, value, choice -- with the option to spend a "tiny" bit more (on the wine) or a dessert or one extra "small plate".

I bet every lady is spending (almost) the same amount on lunch -- but, boy. Do we feel smug -- having ordered lunch at only $4.95 (well... times 2, plus a small glass of wine, plus a dessert -- that we shared...). Actually, I bet we all spend exactly the same - but we don't feel as jittery about it.