Social media and the internet have changed the ways customers find business. Part 2. Understand the effects of over and under pricing. Setting the price inefficiently will have marked and measurable effects on your numbers.
You need to learn to recognize the symptoms of having either a low or high price point. This can indicate that you may need to make a change. Underpricing is often done by companies who want to sell a higher volume, expecting that the customer will assume they're getting a deal, especially in a down economy.
Overpricing may drive your customers elsewhere. Especially when you're trying to get your feet on the ground as your business gets started, it can be tempting to set the price too high. The investment of starting a business can be scary and you'll probably want to start covering costs right away, but consider the customer's point of view. Setting it at a point you'll make money will only work if people are willing to pay for it. Keep a close eye on your pricing and your budget.
Monitor your profits and prices at least monthly. This can give a clear picture of your money flow. Talk to your customers and listen to their feedback. Take it to heart. If they enjoy your product but complain about the price, you might consider making a change. Develop a budget plan. Try to focus on a long term strategy that will result in making the business profitable. This might not involve making drastic changes right away, but slowly moving toward an overall goal of profitability.
Raise prices slowly and incrementally. Instead, raise it incrementally and spend time advertising the product's benefits and advantages, as opposed to apologizing for the increase.
Treat it as a benefit, rather than an inconvenience. Sudden increases will look like desperate moves made by a struggling business, which may or may not be true. You want to avoid the impression that you're raising the prices because you need to make more money.
Rather, you need to make it seem as if you're raising prices because the product is just that good. If the move was too sudden, you'll see a negative change, suggesting that you need to do more to sell the new variation on the product and justify its price.
Use promotions to lower prices and get people in the store. Unless your competition is lowering their price, or you're just not getting the kind of traffic in your business that you need in order to make it profitable, you generally want to avoid lowering prices.
Lowering the price may suggest another kind of desperation--that people are avoiding your store. Using promotions for limited periods of time, or coupons that expire, you can help drive customers toward a particular product or service.
Use discount tactics and promotions rather than lowering the price all at once. You can even alter the amount that someone gets for the same price. For example, November is a month of diabetes awareness. Make sure to the customers about this, as it can help to drive their choices, as well as make them feel better about paying more for something.
They will also know that the price changes are limited. Avoid seeming desperate. For example, an empty restaurant may give the impression that the food is not delicious. Especially if it suddenly becomes very cheap, people may feel the product is of inferior quality.
Part 3. Use creative promotions to get people in the door. Pricing in order to promote a product is a very common application. This gives the consumer the impression that your business is a place to go to get deals, even if you're not always giving them deals. Try letting your pricing strategies advertise for you. Use a Buy One, Get One Free promotion to get people interested in your product and ensure that they'll be struck by the deals they're getting. If you can keep them coming back, even when you're not holding promotions, they'll be hooked.
Often sellers will bundle several products in the same package, moving old or unwanted stock by creating killer deals. Appeal to your customer's emotions and rationality. Promotional pricing strategies can't just be informational campaigns, they have to connect with your target market. A common business strategy involves pricing items in. At a glance, the difference in savings seems huge even though it's non-existent, practically.
Pricing judiciously will help you keep sales high without changing your strategy considerably. Consider creating a "Premium" package to up-sell customers on moderately "improved" versions of the basically the same product, but with more sophistication i.
Consider establishing a "line" of products, with varying levels at which the customer can engage. Try to up-sell promotions to move more merchandise. In Optional Product pricing, companies will attempt to increase the amount customers spend once they start to buy. Optional 'extras' increase the overall price of the product or service. One size does not fit all. You can only go so far pricing all your products based on a fixed markup from cost.
Your product price should vary depending on a number of factors including:. In order to make this call one way or the other, you should first understand what's already working. Analyze the profitability of your existing products, so you can do more of what works and stop doing what doesn't work. You want to find out which of your existing products are making money and which are losing money.
You may be surprised at how many of your products are losing money -- fix those ASAP. You should also constantly re-evaluate your costs. To sell it right, you have to buy it right. If you are having a hard time selling a product at an acceptable profit, the problem may be that you are not buying the product right. It may be that your cost is too high rather than your price is too low.
When to Raise Prices -- and How You should always be testing new prices, new offers, and new combinations of benefits and premiums to help you sell more of your product at a better price. Test new offers each month. Raise the price and offer a new and unique bonus or special service for the customer.
Measure the increase or decrease in the volume of the product you sell and the total gross profit dollars you generate. It is a fact of life in business that you will have to raise prices from time to time as part of managing your business prudently. If you never raise your prices, you won't be in business for long. You have to constantly monitor your price and your cost so that you are both competitive in the market and you make the kind of money you deserve to make.
If a price increase is too high, customers will react pretty quickly. Also watching the competition can help - if you've made a positive change in prices; competitors are likely to follow suit.
You don't want to alienate your existing customer base by raising prices too steeply, especially during a recession. If the customer perceives that the firm's costs are going down while their price is going up. This will not be received well and is likely to backfire. You can always choose to discount your products or give customers something for free in order to get them to try your product or generate traffic to your storefront or website.
You can make Wednesday senior citizen day when seniors get a 20 percent discount. Then maybe you can offer a student discount day. Then all you're doing is keeping the price the same, but to those people you're giving them a cut but it's not like you've lowered all prices.
It's not enough to look at overall profitability of your company every month. You have to focus on the profitability or lack of profitability of every product you sell. You have to make absolutely sure you know the degree to which every product you sell is contributing to your goal of making money each month. Remember: "People respect what you inspect.
You owe it to yourself and to your business to be relentless in managing your product pricing. Remember, how you set the price of the products could be the difference between the success -- or failure -- of your business. The problem was getting readers to pay. What if he gave the content away? Tempted to cut prices? You're not alone. The Price Is Right Setting prices has always been more art than science. New software aims to change that. The Right Price Too many new entrepreneurs harm their own prospects by under pricing their goods and services.
But if those company owners just take the time to think, they can set their prices closer to fair market value. Is It Time to Raise Prices? Boost your bottom line by taking the guesswork out of pricing. Flexing Your Pricing Muscles Despite years of almost no inflation, you may have more pricing power than you think. Here's how to exercise it without bruising yourself in the process. Steinmetz, and William T.
Brooks National Federation of Independent Business This trade association for small and mid-sized businesses maintains a section on how to set prices, when to give discounts, and when to raise your rates, among other topics. Small Business Administration Government agency for small business matters operates a website devoted to market and price decisions that businesses must make.
Editorial Disclosure: Inc. This post was originally written by Alexis Damen and has been updated by Michael Keenan. Alexis Damen is a Shopify merchant turned digital marketer. Her specialties include content marketing and writing for SaaS and D2C ecommerce companies.
She occasionally writes about small businesses and content marketing at www. Get exclusive behind-the-scenes merchant stories, industry trends, and tips for creating standout brick-and-mortar experiences. Try Shopify free for 14 days, no credit card required. By entering your email, you agree to receive marketing emails from Shopify.
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