The Price is the Price
The first quarter of the year is coming to a close. Analyzing your business thoroughly during this time can be incredibly beneficial in formulating a plan for how you can achieve your goals for the rest of the year. Tip #1 - Don't lower your prices. The price is the price.
With the boom of entrepreneurship, it may seem that your market is saturated. Existing in that saturation can create a temptation to focus solely on closing a sale and making some profit. Dropping your prices can seem like a quick fix to boost sales and attract customers. Don’t give in, this strategy might do more harm than good.
Why dropping your prices may not be the best way to help your business:
It Reduces Brand Image
When you drop your prices, customers may perceive your products or services as being of lower quality or less valuable. According to Vanderbilt University research published in the Journal of Consumer Research, cheap pricing might backfire on businesses because customers often see low prices as an indication of a low-quality product. This can damage your brand's reputation and make it harder to command higher prices in the future.
It Attracts Bargain Hunters
Yes, dropping your prices can attract more customers. Because who doesn't like a bargain? But, these are the type of customers who are less likely to remain in business with a single brand or company. Meaning, you might end up with a customer base that is only loyal to the lowest price tag, making it hard for you to keep a stable revenue.
It May Harm Profitability
Dropping your prices may seem like a good idea when your products or services are flying off the shelves. But a quick look at the books and you’ll realize that dropping your prices also means less revenue and less revenue means that you might struggle to cover your cost which can lead to you not having enough to invest back into your business.
What can I do instead of dropping my prices?
Conduct Market Research:
Conducting market research can be a good starting point in figuring out how you should price your products or services. In doing so, you can identify how much your competitors are charging, giving you an idea of what a fair price should look like, and determine when you should have temporary sale prices. Your research can also give you an understanding of how your competitors are marketing or selling the same products or services and more importantly, who they’re selling them to.
This can ultimately help you in coming up with a price tag that, not only is fair but also is competitive. And as a bonus, you’ll have a few ideas up your sleeve on how to sell or market your products or services that are unique to you and your brand.
Communicate the Value of Your Offerings:
Now that the price is set, it's time to communicate what your customers are getting with that price tag. Focus on highlighting the benefits of your products or services. Ask yourself, “How is this different from the ones that are being sold by my competitors?” Identifying what’s unique about your products and services is a great way to showcase the value that only YOUR business can offer.
Being firm on pricing may be counterintuitive but it's actually a better strategy for your business in the long run. By understanding the unique value of your products or services, the marketplace, and also your target customers. You won't have to rely on dropping your prices to keep your business alive. Charity aside, the price is the price.