By – nsjfinancialservices
24.08.22 04:45 PM
Your pricing strategy can be the difference between making more money and losing money in your small business.
While raising prices may feel like an obvious way to make more money, you can still end up hurting your business if you don’t take your market and product line into account first.
Whether you’re charging per hour, per project, or per month, this guide will help you make sure you have the right pricing strategy to make more money in your small business.
Assess Your Competitors’ Pricing Strategies
When you are examining your competitors’ pricing strategies, see how they sell to their customers and how much they charge for their products. Make sure you keep an eye on what competitors are successful with pricing, because those strategies may be similar to yours. If a competitor is overpricing their product, don’t be afraid to under-price them or have a better quality product than them.
Avoid price wars where competitors attempt to undercut each other’s prices because it will cause customer loyalty and return purchases to decline significantly.
[Tip] Analyze Pricing Strategies:
Take some time to analyze the pricing strategies of companies who seem like they know what they are doing.
Check out our e-book all about pricing strategies and how to implement them into your business here.
For example, take a look at Apple. Apple is well known for creating new ways of selling its products by having customers pay full price upfront while also paying an annual fee if they want support from Apple experts via phone or online chat. Compare Your Pricing Strategy With Competitors’ Pricing Strategies: It’s important to compare your pricing strategy with that of your competitors.
One way to do so is by going through old ads and catalogs of past sales, finding out when certain items were most expensive. You could also try setting up a survey asking customers how much they would be willing to pay for different products and services provided by you as well as your competitors.
Determine What Customers Will Pay
The first step toward setting a successful pricing strategy is to figure out what customers will pay. While many companies arbitrarily set prices based on their instincts and gut feelings, the smart approach is getting out of your office and talking to customers. Put together a survey, send out requests for quotes (RFQs), or run an online poll asking customers how much they’d be willing to pay for a particular product or service.
Even if you don’t get back a ton of responses, you should still have enough information to develop pricing strategies that work.
Some questions you might want to ask include:
- What would make you choose our company over another?
- What price point would cause you not to buy from us?
- How much are you currently spending on products/services like ours?
- Is there anything we could do that would cause you not to buy from us?
And so forth…
By doing some research, you’ll start developing an idea of what works and what doesn’t. This way, when it comes time to actually set pricing for your business, you won’t be guessing, you’ll know exactly where to start.
Set Realistic Goals
When pricing a product or service, aim for what’s achievable. Remember that big margins are possible only if you’re selling a lot of your product or service; if you sell one per month and it costs $1,000 each, your margin is 100%, but that also means you have to sell ten units every month just to cover your costs. You’ll need to increase your sales volume dramatically before you see any significant profit.
If you set realistic goals—say, 1% growth per year—you’ll be able to focus on strategies that will drive those results. This doesn’t mean settling for small gains; instead, it means making sure that even when things don’t go as planned (and they won’t), you still end up where you want to be over time.
In other words, you should always ask yourself:
If I get everything I wanted today, how would my business look next week? Next month? Next year?
Offer Discounts for Multiple Purchases
A simple pricing strategy that many businesses overlook is offering discounts for bulk purchases. If you offer smaller packages of your product or service, ask customers if they’d like to buy multiple units at a discount.
For example, paint companies often offer four-packs of their products: four gallons of one color for a discounted price. Small business owners should consider larger quantities and what they could use them for. Are there opportunities to bundle services?
Can you sell a starter kit that includes multiple items from your store? You may be surprised by how much extra revenue bundling can bring in. Just make sure not to change prices too frequently so that customers know exactly what they’re getting.
Also don’t forget to mention another popular pricing strategy, free trial periods. Many businesses offer free trials or free samples of their products in order to get people hooked on their offerings before asking for payment.
The best part about these types of strategies is that they require no up-front costs and are incredibly easy to implement—all it takes is setting up an email list (or newsletter) where interested parties can sign up for updates about when trials begin. By doing so, you ensure yourself a steady stream of new sales as long as people stay interested in your product!
Allow People to Customize Their Purchase
Adding customization to a customer’s purchase not only adds convenience, but it also gives them an added sense of importance. In our highly personalized culture, customers are usually pretty excited when given options and enjoy being able to tailor their experience as much as possible. To help your small business start earning more money and attract a larger number of clients, here are some specific tips for implementing pricing strategies that work.
Allow Customers to Choose Their Shipping Method:
Letting people choose between ground shipping or next-day air is one way you can give them control over how quickly they receive their product or service. Offering free shipping is another popular choice among online shoppers because it shows that you value their time and are willing to do whatever you can to get them what they want fast (even if you lose a little money on shipping). You could even offer additional services like gift wrapping or expedited delivery so people know they’re getting something special whenever they buy from you. This helps establish your brand as trustworthy, which will go a long way toward building loyalty down the road.
Offer Your Products at Different Prices Based on Style or Size:
It’s no secret that clothing prices vary based on style and size. Some stores have several price points for similar items—one pair of pants might be $40 while its identical twin costs $50—but each version comes in different sizes, allowing shoppers to select exactly what they want without having to pay extra. As a small business owner, consider offering products at different prices based on size or color as well.
Create Bundles That Include Extras:
Another easy way to give people control over their purchase is by bundling items together at a discount. For example, let’s say you sell t-shirts and sunglasses. Instead of charging $20 for both items separately, bundle them together at a discounted rate ($25 total) and let customers decide whether they want to buy both or just one item. This lets people customize their order while still saving money overall.
Allow People to Customize Their Own Items:
If your product lends itself to customization, such as custom t-shirts or customized shoes, don’t be afraid to let people take advantage of that feature! Just make sure you clearly explain what level of personalization is available so there aren’t any surprises later on when someone wants something more complex than expected.
Give People More Options to Save Money:
While you may already be offering coupons and discounts to people who sign up for your email list or follow you on social media, you can save money on those offers by making them more attractive. For example, instead of giving away a 10% off coupon that can only be used once, create a new promotion every week or month that allows people to save 20% or 30%.
Offer Free Trials:
One of the easiest ways to allow people to customize their purchases is through a free trial period. Even if they end up canceling before they’ve paid anything, they’ll feel good about trying out your product or service before deciding whether they really need it.
Consider Alternative Payment Methods
Many small businesses have a one size fits all mentality when it comes to accepting payments. While cash is still king, there are many other convenient and profitable ways of handling payments. The first step is figuring out what your customers want—and then finding a way to give it to them.
Consider alternative payment methods like Square or PayPal to accept credit cards on your smartphone or offering gift certificates for popular items.
One thing that’s important to remember: no matter how good an idea sounds, don’t get carried away with it until you test whether people actually respond positively to it.
That’s where offering free samples come into play. By giving away a few things for free, you can gauge interest and see if there’s enough demand to warrant changing your whole business model. If not, no harm done! At least you tried something new. And if so? Well then congratulations! You just made some extra money by getting creative with your pricing strategy.
Create Loyalty Programs for Repeat Customers
Loyalty programs are an inexpensive way to improve customer retention and acquisition. They serve as an incentive for repeat customers and keep your brand top-of-mind even when you’re not directly interacting with those customers.
A great way to use loyalty programs is by giving rewards for repeat purchases; doing so will enhance customer retention by encouraging people who already buy from you frequently, rather than new customers who may only purchase once or twice before moving on.
For example, a pizza shop could offer free breadsticks after a certain number of pizzas have been purchased—the goal being to encourage loyal customers to order multiple items instead of just one pizza at a time. It’s also worth noting that most loyalty programs don’t require any upfront costs—they simply involve tracking customer purchases and rewarding them accordingly.
The point here is that you don’t need to be Amazon or Apple to build an effective program: if you have repeat customers coming through your doors regularly, it makes sense to reward them with discounts and other perks that will get them back again (and hopefully bring friends along).
Create Promotions That Drive Sales
One of the best ways to get customers into your store is by offering promotions that are too good to pass up. No matter what you’re selling, it’s possible to increase your sales by discounting prices, offering free giveaways or otherwise making a special offer that’s hard for people to resist.
When working on your next promotion, think carefully about when you should offer it and how long it should run. You don’t want to have a promotion running at all times—you want to time them so they capture as many potential buyers as possible.
For example, if you sell clothing, consider offering discounts during seasonal shopping periods like back-to-school or Black Friday weekend. If you own a restaurant, try offering discounts around lunchtime or happy hour.
The key is to find out when your ideal customers are most likely to buy something from you and then use that information to create an irresistible offer.
Give Something Away Free When You Sell Something Else
One of our favorite ways for small businesses to upsell products is by giving something away for free when customers buy another product. An old restaurant tactic that’s made a comeback, free add-ons are an effective way to increase average check size while also boosting profits.
The idea behind these deals is very simple: Customers get something they want (even if it’s just an olive or a side salad) and you get more sales.
A couple of tips on how to do free add-ons right: Make sure your customers get some value out of what they’re getting and think about how you can entice them into making additional purchases during or after their visit.
For example, offer a bottle of wine with dinner but only give it away when customers order dessert. Or offer a free cookie or brownie with the purchase of any beverage at Starbucks and then suggest other items like coffee cake or muffins. It’s not enough to have a great deal—you need to have an even better one!
