Finance Topics
IN THIS LESSON
Many small businesses find themselves feeling pressure...
…to lower their prices.
Many small businesses find themselves feeling pressure to lower their prices. It may come when a low-priced competitor shows up in your market, or when a pinched economy hits your industry. Yet few small businesses can afford to get themselves involved in a price war.
There are a handful of times when dropping prices makes sense; for example, when your cost of doing business has dropped and you want to pass along these savings. But if your existing prices are set to cover expenses and necessary profits, lowering them could damage the bottom line. What’s the answer? Watch the video, and consider using the tactics discussed there to attract and retain customers without getting out the red pen.
Video Transcript
Tactics to avoid lowering your price. Many small businesses find themselves feeling pressure to lower their prices. There are a handful of times when dropping prices make sense. For example, when your cost of doing business has dropped and you want to pass along these savings. But if your existing prices are set to cover expenses and necessary profits, lowering them could damage the bottom line.
Consider using these tactics to attract and retain customers without getting out the red pen. One. Emphasize customer service. By demonstrating the added value you give customers, you may be able to justify higher prices while keeping the competition at bay. This tactic is more strategic than getting into pricing wars with competitors because it encourages long term client relationships.
Two, package products and services together. You can create more value for customers by grouping related products and sell them for a price that is greater than any single item, or less than it would cost to buy each one separately. This tactic can help you avoid permanently reducing prices on any single item while increasing your overall sales. Three, decrease amounts along with price. If you find the market is demanding lower prices, consider whether or not there is a way to offer goods and services in smaller amounts.
This tactic can give customers the perception that you've lowered prices while helping you to keep costs in line. Four. Add services Instead of cutting prices, maintain them and include an additional service for the same amount.