Real Business with Alan Wick


The "Real Business with Alan Wick" show is broadcast on the last Sunday of every month.

It consists of an interview with an entrepreneur, then Alan talks about some of the key takeaways from the interview. Feel free to call the show's 24/7 hotline on 01342 889488 to request a call back during one of his shows, to contribute to the discussion or to ask Alan a question about your business.

For more information about Alan's background, please see his website here.


The crucial difference between Pricing and Charging

Pricing and charging are often seen as one and the same. I believe that pricing a product or service is a strategic decision, whereas charging is tactical. I’m defining strategy as the game plan and tactics as the moves.

Pricing products and services needs research, planning and thought. For example, the Recommended or Suggested Retail Price of a product, the “Rack Rate” of a hotel, or the headline hourly or daily rates of a service. Setting the price for that product or service sets its perceived value i.e. how it’s positioned in the marketplace.

Charging for that same product or service is tactical. It can be varied or altered according to circumstances. A business can discount a product or service for a number of reasons.

What’s crucial is always to show the full price, as well as any discount, so that the original perceived value is not lost. For example, imagine you're in the market for a camera. Let’s suppose it’s the first time you’ve bought one. You’re feeling both excited and nervous as you enter a camera shop.

The camera salesman listens to your needs and says, “Okay, given what you’ve told me, I suggest you look these three options. They’re all excellent; each one has its pros and cons: there’s this one, which is priced at £1,000, this one priced at £500, and this one priced at £250. The one priced at £1,000 is on special offer, because they’re going to replace it with a newer model, so we’re able to charge you only £500, in other words a 50% discount. Which one would you like?”

Given these options, I think most of us would choose the £1,000 one, discounted to £500, rather than the £500 one or the £250 one. Most of us associate high price with premium product, and by definition, the highest-priced product or service is perceived as the best.

We associate price with value, so it’s very important that pricing of products and services is carefully thought through - i.e. a strategic decision - it says what you, as a business owner, value your products or services at. 

As for charging – be careful not to dilute the value of your product or service by offering discounts or specials too often; be tactical about why, when and to whom you offer a discount.