As a small business, one of your greatest goals should be getting more customers/clients. If it’s not this, then what else would you want? More customers mean more money for your business which in turn increases your business’ lifespan. As you know, the only way to grow your customer base is to give them value through your products.
As new entrepreneurs, one of the first set of questions we ask ourselves is, “How much should I sell my product?” The subject of pricing is very important because it determines how your customers view your business. If you are too low, they can see you as cheap. If you are too high, they might perceive you as thieves. So, how do you know how much your product is worth?
Price and value go hand-in-hand and your customers know this. The price of your product needs to first invoke the will of the customer to buy it before they even decide on which one to buy. The price of your product must first make them want it because if they don’t, then you probably won’t make any sales. There are rules in fixing prices for your products and following them could make things a whole lot easier.
In today’s struggling economy, the most logical thing to do when competitors increase prices is to keep yours lower. This way, you get to attract more customers. If you are serious about your business, this is the worst approach you can ever take. Don’t fall in this category.
You started your business for two reasons- you love what you do and you want to make money. But when you are underpaid because of your pricing, making money becomes almost impossible. Your products’ prices can not stay stagnant for long and you need to understand that.
Now this is one hurdle that many entrepreneurs stumble over. Why? This is because it involves timing and in business, timing is very important. The price of your product is dependent on various factors, one of which is your competitors. Consumers tend to compare prices and go for the one they feel is right.
What happens when your product is not the right one for them? Then you’ll need to check your pricing structure. Perhaps your value is way below expectation or you have gotten your price to value ration wrong. Knowing the signs that indicate the time to raise prices would help your business experience more conversions than ever before.
How Do You Raise Your Prices?
Now that you know the technicalities behind price increase, you need to know how to do it and still keep your customers. Not all customers like price increments but as stated earlier, it can not be overlooked. Here are a few ways to strategically raise your prices.
- Be Honest
The first step is to be honest about your price increment. Do not just raise prices because you want more money in your pocket. Your customers must see the reason behind it and you must explain this to them. In other words, let your price increase be for a genuine and credible purpose. This purpose should benefit both you and your customers. Regardless of the kind of business you run, honesty always counts.
- Offer Something Extra
I’m sure you know the “buy one and get one free” incentive. This is an example of raising prices with something extra. Say for example, you used to sell weight loss exercise kits for $200 each and then you raise the price to $240. Yes, this could turn customers off but when you include that extra, like a weight loss diet plan (worth $80), your customers will recognise the added value.
Many believe that by doing this, they are cutting themselves short. This is not true. By selling the package (worth $280) at $240, you not only keep your customers but attract new ones.
- Raise Prices Incrementally
Some products need 50% in price before you can start making any decent profit. But you don’t just increase a $400 product to $600 all at once. In this case, steady increments at 5% or 10% work best. This option will also be effective if your competitors increase theirs by 20% or 25%. You get some leverage and attract new customers while your prices stay cheaper at the time.
- Tell Them In Advance
Sending letters to your customers telling them of the imminent price increase will show your respect for them. When doing this, honesty also counts. Be very transparent and let them know why they would have to pay extra for your product. This will definitely reduce the effect on them when you actually raise your prices.
In business, your customers are everything and you are nothing without them. Show that you have respect for their money and they’ll prove their loyalty to you.