It’s important to get a price point that’s right
Many businesses are not charging enough or what they deserve to be paid for their time and effort they put into the products and services we sell. But how do you know what to charge?
It is a fact that 2 out of 3 small and medium sized businesses will go bust within the first 2, 3 or 5 years, a shocking 66% and there is a huge myth that drives people not to charge enough. The myth? That customers make buying decisions based on price alone. In fact if prices are too low some customers are suspicious or sceptical about WHY the price is to so low and prompts them to think perhaps the quality is poor or the delivery lacking.
If everybody bought on price alone, we would only see people wearing cheap clothes and accessories, driving cheap cars, nobody eating in restaurants or holidaying in exotic locations (pre-covid obviously!). People purchase for luxury, to feel good, appear ‘better’ than others, precieved quality, desire, trust and ease of services.
Apple came into the market just over 10 years and appreicated the elasticity in prices, tested the market and before long we saw iPhone prices go from around £100 to the top of the range models hitting £1100 today!
Two dire mistakes for a business to make in a difficult economy like the one we’re coming out of now, is to stop advertising and slash prices. You NEED to stay in front of customers, in the printed ads, online, in their minds, in their subconscious, ready for when they need your product or service and they make that purchase.
Reducing your prices shows a desperation to your potential customers and potentially a lack of faith in your product. It also reduces income and profit – when profit margins are squeezed there is less money to invest. Reducing prices by 10 or 20% is not 10 or 20% in profit, it is much more and can do your brand real harm overall.
Most business owners are scared of reaching the point where they have strecthed as far as they can go and believe customers will back away, but research suggests otherwise – find out what that is as until you do, you will never know the price potential in your business.
TIPS:
– Find out what’s important to YOUR customers – is it quality, speed or delivery?
– Test a 10% price increase for new customers.
– Testing new customers allows you to do a bigger jump for a few weeks without rocking the boat of your existing customers.
