Wednesday, October 7, 2015

Raising your prices

     Free daily tips, information, advice and ideas
     to help you better manage your small business

     Most small businesses operate on a thin margin. Income scarcely exceeds expenses, leaving little room to grow. 

     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.

     Markets for goods and services are all over the map. You can price low and attract bargain seekers. You can price to meet the competition and struggle to bring clients and customers to you. Or you can price higher and attract a higher end market segment. 

     Example: A hairdresser can struggle to make a living pricing haircuts at $10. Raise the price to $50 and the bargain seekers go elsewhere. Raise the price again, and you'll better define who seeks you out for that special haircut. By raising your prices you will serve fewer clients, but you can have a healthier bottom line. 

     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. Bargain hunters will buy cakes at the supermarket, but buyers who appreciate and can pay for creatively designed cakes will come to you. 

     This shows what can happen when you target certain market segments by raising your prices. Pricing positions your business in the public's minds. 

     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 to attract those who appreciate and will pay for your quality products/services and your superior customer service. You price to attract those types of 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 hand-painted scarf to $100 or more, however, the WalMart shoppers are weeded out in favor of a more 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 to drop off your dog on your way to work and pick up after work. The groomer not only grooms, but "babysits" the dog all day. This convenience is worth much more to the customer. 

     Figure out what market segment you want to serve. Then set your prices to attract those people. You can build a healthier business by pricing to a higher end of the market. 

No comments:

Post a Comment