Pricing Strategy..based on Feelings or Facts?

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..