Monday, December 8, 2014

Raising prices

     Free daily tips, information, advice, and ideas
     with examples from small businesses.

     Most small businesses operate on a thin margin. Income scarcely exceeds expenses, leaving little to grow and expand. 
     If this describes your situation, you might give some thought to your pricing. You might be letting your competition guide your pricing, instead of the marketplace.

     The market for goods and services is all over the place. You can price low and attract the bargain seekers. You can price to meet the competition and struggle to bring clients and customers to you instead of your competitors. Or you can price higher and attract a higher end market segment. 

     Example: A baker will not sell many cupcakes carrying a price tag of $100 each. But that same baker can sell a creatively designed cake for a special occasion at $100--or more. 

     Example: A hairdresser can struggle to make a living pricing haircuts at $10. Raise the price to $50 and the bargain seekers will go somewhere else. Raise the price again, and you'll define who seeks you out for that special haircut. 

     These two examples show what can happen when you target a certain market segment. Your pricing tends to position your business in the minds of your potential customers. Higher pricing tends to attract a different group of people.

     Figuring out and targeting your client/customer base is crucial to growing a healthy business. Adjusting your pricing to a particular market segment helps you do this. You want clients/customers who appreciate--and will pay for--your quality product/service and your superior customer service. You price to attract these people.

     Example: A fabric artist who designs and sells women's accessories priced competitively with WalMart will struggle to make a living. By raising prices for a scarf to $75 or more, the WalMart shoppers are weeded out in favor of a more selective and appreciative crowd. 

     Example: A pet groomer who offers an inexpensive grooming service can double or triple prices by offering a little more. Get the word out: drop your dog off on the way to work and pick up after work. The groomer not only grooms but "babysits" the dog all day. The client will pay much more for the convenience.

     Figure out what market segment you want to serve. Then price accordingly. Price too low, and people think your product/service is not worth much. But by moving to higher pricing, you define the market you want to serve--and you end up with a much healthier business.

     Pricing must match the quality of your products/services. Without quality, you can't expect people to pay more. But shoppers are astute--they know what they are paying for. And they'll gladly pay more for quality, creativity, convenience, and good customer service.      

No comments:

Post a Comment