The price is right… er, isn’t it?
The correct pricing strategy is as much of an art as it is a science
Ian Wylie Journalist, broadcaster, educator
Reading Time 4 minutes
Setting the right price for products and services has been one of the biggest challenges facing small-business leaders in 2025. Inflation and supply chain disruptions have been driving up costs unpredictably, making it difficult to set stable, profitable prices. At the same time, customers remain highly price-sensitive, forcing firms to balance competitiveness with the need to protect their margins. SMEs know they can’t afford to treat pricing as an afterthought, but how can they strike the right balance between competitiveness, profitability, and customer trust?
Win on price, retain on quality
For Simon Morrish, Help to Grow: Management Course alumnus and Chairman of external maintenance and landscaping company Ground Control, first impressions matter. ‘I often tell our team to win on price, retain on quality,’ he explains. ‘We know that we have much higher quality and consistency than our competitors, but new clients don’t know that and therefore are still very price sensitive.’ For small businesses, this means recognising that an aggressive opening price can help secure new customers, but long-term relationships will be built on the delivery of value and reliability.
At Ground Control, pricing is typically contract-based and tailored, often through competitive tendering, with rates structured around service packages, seasonal demand – such as for winter gritting – and performance-linked agreements, rather than one-off jobs.
Once the customer relationship is established, Morrish says quality becomes the most powerful retention tool. ‘Once we’re in, we then have to ensure we deliver the quality so that they never leave,’ he says. ‘We hate losing a client. If we do, in most cases the client ends up returning, when they realise that the quality we offer is worth it.’ Pricing may get you through the door, but it’s service that keeps you there.
Be specific about what you’re pricing
Ground Control works with large organisations, including Network Rail, utility companies and local authorities, to deliver long-term, outsourced facilities management of outdoor spaces. Morrish cautions against vague agreements. ‘We have to be very diligent about job specs,’ he says. ‘Often client tenders can be quite vague and therefore we have to price to what the client is asking for in the tender. We’ll subsequently work with them to deliver, and price, what they really want.’
Being precise about what is and isn’t included in your pricing is particularly important when costs are volatile. Clear scoping protects both sides. You avoid under-quoting. Customers avoid the disappointment of unexpected add-ons. In a climate where margins are tight, that clarity becomes a form of risk management.
Stay agile to adjust
Few businesses are immune from rising costs. ‘We’ve had a number of conversations with clients regarding how that needs to be reflected in our pricing,’ recalls Morrish, whose advice is to treat pricing as an art, not a science. ‘At the end of the day, I tell the team that the price we need to go in to the client is £1 less than that required to win the work. Any higher and we’ve lost it. Any lower and we’ve left money on the table.’
For small-business leaders, this means developing what Morrish calls a ‘feel for the market’ and adjusting as conditions shift. In an environment where costs are unpredictable, agility is as important as analysis.
Avoid common mistakes
Professor of business strategy at Norwich University Business School Paul Dobson has studied pricing strategies across many industries, and he is blunt about where SMEs go wrong. ‘Most common pricing mistakes by SMEs are down to not doing enough research to optimise prices for profitability,’ he argues. ‘Simple pricing mechanisms like “cost-plus” or “matching competitors” mean that not enough attention is given to customer demand.’
Instead, Dobson urges leaders to look for opportunities to differentiate. That could mean varying prices by customer type (e.g., offering different packages for frequent versus occasional buyers) or by time (e.g., using cyclical or dynamic pricing to capture value when demand is highest). ‘Understanding price sensitivity for different customers, across different products, and for different time periods is absolutely critical for optimising prices,’ he says.
Communicate, don’t conceal
Transparency when communication pricing changes ‘helps build stronger ties that can boost customer loyalty’, says Dobson. ‘In an inflationary or volatile economic period, it’s crucial to be transparent and let customers know your reasons for raising prices when facing unavoidable cost pressures. Customers will resent attempts at sneaky or unexplained price increases, so it’s better to be clear and open.’ Building trust in this way can transform a difficult conversation into an opportunity for loyalty.
Tailor pricing to customers
Dobson also cautions against a one-size-fits-all approach. ‘Customers are rarely all alike, so they have different needs and different willingness to pay,’ he explains. ‘Just as one size doesn’t fit all, then one price doesn’t fit all.’ For SMEs, this could mean segmenting your customer base and tailoring offers to what each segment values most, whether that’s speed, convenience, reliability, or price.
Getting this right involves both science and art. ‘The science is from careful market research,’ says Dobson, ‘but the art is communicating the value proposition to individual customers so that they feel reassured that trading offers a mutually beneficial win-win outcome.’
Ian Wylie Journalist, broadcaster, educator
Latest articles
Find Out More
Inspire your team to start thinking differently about the future of your business
Help to Grow: Management Essentials is a free online course that provides the essential concepts required for business growth.
