Two of the more influential individuals in my business education and subsequent life gave me two very conflicting theories about price. They shall both remain nameless, in an attempt to protect my identity as much as theirs, however their ideas I'm happy to share with you. Individual A a renowned professor of marketing told me "you never differentiate on price". Individual 2 a highly successful businessman told me "there are three things clients are interested in; price, price and price". I disagree with both these assertions and spent some time arguing with both individuals.

However I think there is an element of truth in both of these ideas and a valuable point that needs to be understood. Individual A was trying to emphasize the importance of the quality or uniqueness of a product of service being the key driver in the success of a business. It is no good just being cheap. If you want to differentiate yourself from your competitors you need to do so by offering a better product or better after sales service or greater reliability. At The Building Experience we differentiate ourselves by offering a totally unique service, it's the experience that we give our clients that sets us apart.

That said, i believe individual A went too far suggesting you never differentiate on price. I think the success of easy jet disproves this theory and I'm sure at least 90% of people choose a mortgage solely based on price.

Does this prove individual 2 was correct with his price, price, price, price and price theory? Clearly not. I don't drive a Skoda, so price wasn't the only factor in my decision about what car to buy. Furthermore, you don't see Nick Knowles walking around in threads he got from the local second hand store. In fact he's usually dressed from top to toe in designer gear which is why he's my tip for the UK's best dressed man 2007. Anyway, getting back to the point, customers are clearly interested in more than just price.

Somewhere between these two ideas lies the truth and it is essential that all companies have a pricing strategy if they are to succeed. At The Building Experience our pricing strategy is complicated. On some jobs we will be cheaper than a standard builder as the client will save money because of their involvement. For example a labour intensive job, such as one which involves a lot of digging. On the other hand a plastering job where the client wants to learn a new skill, their involvement will actually slow the job down, thus making us a little more expensive. Therefore it's not easy for us to formulate a pricing strategy for our company but we have one nonetheless and we're confident it will help us succeed.

At this point i could start explaining fixed costs, variable costs, revenue, profits, diminishing marginal returns, etc, etc, all crucial factors in understanding price. However I'm wearing my marketing hat today, rather than my economics bandana so i think I'll leave that for another day.