You want more business – what business owner doesn’t? But don’t make the mistake that too many small business owners make and try to bring in more business by cutting prices.
Because unless you are a massive corporation with hundreds of locations throughout the region or even the country, you can’t get rich by charging cheap prices.
Unfortunately, the “cheap” trap is very easy for small business owners to fall into because low prices are the most obvious way to appeal to customers. If you want to attract business away from your competitors, the thinking goes, you need to undercut their prices. The problem with this strategy is that it leads to price wars, where competitors race to the bottom – the lowest possible price at which they can make a profit.
This is not a place you want to be because it results in tiny profit margins for everyone concerned. Now, this can be a winning strategy for a business like Wal-Mart, which maintains its profit margin with robust systems and with a huge volume of sales. But for a small business, this approach just doesn’t work.
So how can you avoid these price wars? The answer is simple, but not easy to implement: you need to establish value for your products and services that allows you to charge premium prices. Below are three ways to do this:
Pay attention to the packaging. Have you ever purchased an Apple product—an iPhone, iPod, or maybe an iPad? If so, take a moment to recall the packaging. Apple products are always packaged in a sleek, elegant manner that makes them feel expensive. And because they feel so valuable, their price point is justified.
Offer choices. Recent studies have shown that increased choice, when it comes to a product or service, create a perception that even the smallest details must be very important. Offering a number of choices (3 is often good) gives your customer the ability to “customize” their order to meet their specific needs- and consumers are willing to pay more for “custom” products and services.
Back your offerings up with excellent customer service. Poor customer service is a major frustration for consumers, and years of research and experience have convinced me that most customers and clients will gladly pay premium prices if they know that they’ll receive exceptional service should they need it.
You want to grow your business – I understand that. And sometimes, slashing your prices seems like the best solution. I understand that as well! But resist the temptation, and instead work to establish the value of your products and services so that you can justify your higher costs.