Monday, January 25, 2016

Raising your prices

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          to help you better manage your small business

     Many small businesses operate on a thin margin. Income scarcely exceeds expenses, leaving little to grow and expand. 

     When this happens, owners should give some thought to raising prices. 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 to your competitors. Or you can price higher and attract a higher end market segment. 

     Example: A baker will not sell many cupcakes priced at $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 go elsewhere. Raise the price to $100, and you define a market segment of people who seek you out for your special cuts. 

     These two examples show what can happen when you target a certain market segment. Your pricing will position your business in the minds of your potential customers. You are branding your business.

     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 or hat to $100 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 to 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 you product/service is not worth much. By pricing higher, you define the market you want to serve and you end up with a much healthier business. 

     Pricing must match the quality of your goods/services and your customer service. Brand your business with the prices you charge. Target your customer base with your pricing.  

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