Pricing Strategy..what is it based
on? Feelings or Facts?
Empress of Biz,
JoAnn R. Forrester
Your sales
have tripled...but your profit has not. You
have made adjustments, invested in equipment, hired staff and improved
efficiency, and yet the bottom line remains flat. What do you do next?
The next logical step is one that often
creates great resistance from owners…raise prices. “What!
Are you crazy? If I raise my
prices I will lose my business. My customers will never stand for this.” My answer to this strong reaction is, “If
you feel your customers only buy because of your low price …then you are in
trouble. There is ALWAYS going to be
someone who charges less. So let’s find
out why people buy from you. It is time
to remove the feelings from the pricing equation and look at the facts”.
First we need to review your position in the overall
market place. Where do you fit? What is happening in your
industry? What are the pricing
strategies? Profit range? Where are the opportunities
and possibilities? To find this information and more you can use one of our
excellent Small Business Development
Centers to do the research and provide an unbiased data.
Meanwhile, while
you are “patiently waiting” for results, you can start your own research” by a simple
method. ASK your customers, from the
best--- to the one whom only buys from you as last resort. Pick up the phone, and ask for input. “What
is it about your business they like? Why do they buy? Convenience? Comfort? Quality? Unique product/service? Superior performance? Reliability?
Value? The only store in town? Friendly
Service? Price? Easy access to the Web? Etc.
Make sure
you ask your employees. Listen to them. They are your front line and have
information you do not have. Check the competition. Are
they higher or lower in price? What’s their reputation? What are their strengths? What are their weaknesses?
Think this
method is time consuming and bothersome?
Yes it can be. Just think Sam
Walton of Wal-Mart. He built his empire based upon daily conversations with
customers and employees.
The answers
are in, and most likely, PRICE is NOT the reason customers buy. Now you can make decisions on changing your
price based on facts not feelings.
Watch for my next column in the Pittsburgh Business Times in which we will discuss how to raise
prices in a manner that is acceptable to all..