Friday, July 24, 2015

Raising prices

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     The prices you set for your products and services go a long way in determining your success. Too low, and you risk bankruptcy. Too high, and the same thing can happen.

     To get the price right, you might need to experiment. A lot has to do with the business you're in. If your product or service is totally unique, you can set prices high. If your product or service is commonly offered by competitors, it's a different world.

     Example: Judy sells fancy teas and coffees online. At first, she set her prices to compete with others--both locally and nationally. She was selling lots of teas and coffees, but not making enough to grow her business. She decided to inch prices up, a little at a time. It didn't seem to affect overall sales. So she inched up more. Still, there was no noticeable effect on sales. Then, she took the plunge, raising prices significantly--at the same time she offered free shipping. Some customers dropped out, but she attracted more customers overall. She did even better when she began using social media--highlighting the free shipping. 

     Example: Tom's auto repair shop was attracting more customers, but he decided to raise prices. He tried inching prices up overall, and noticed no difference in customer response. He continued inching prices up until he thought he noticed a different customer response. That was when he leveled off prices. Today, he has a much healthier operation. 

     Example: Rita runs a successful hair salon. With rent and supplies costing more, she raised her prices. She noticed an immediate decline in some types of customers. That was when she decided that she was going after the wrong market. She began offering additional services--and raised her prices significantly. Today, she is serving fewer customers, but her bottom line is much healthier. She used pricing to redirect her business.

     Pricing is a good mechanism to change directions in your business. Higher prices attract a different type of customer. Used intelligently, pricing can lift your business to a healthier plane. 

     All of this points your business toward that segment of the marketplace you want to address. You can work yourself to death serving everybody. But an eye to the vast marketplace can help you grow and expand your business, targeting those who pay more.

      Don't ever mess with your pricing until you have looked at the marketplace. The marketplace always will tell you where and how much to change what you are doing. 

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