I am constantly told by business owners that they are thinking of reducing their prices in order to attract more customers and I say the same thing to them every time – Don’t Do It!
Before you lower your prices please think VERY carefully. No matter what you think, you will never be the winner in a price war. There will always be a bigger player who has bigger marketing power, bigger buying power and deeper pockets than you.
If you reduce your prices you will end up working very hard for not a lot. You may be perceived as “cheap” and therefore not so attractive to potential customers.
It will stop you from growing your business further
What usually happens when someone charges really low prices is that they end up with lots of customers but, more often than not, they are the wrong type of customers. They usually create far more aggravation and hassle and make life pretty miserable for the business owner.
But there is also another problem with lowering prices that most business owners fail to realise – you lower your prices, you get lots of customers, you’re busy working for very little profit which means you have no spare time to develop and grow your business further.
So often I see business owners who drop their prices in the hope that it will bring more sales but they fail to see that not only are they working extremely hard for very little profit but they also leave themselves with no time. So often I see people who are completely exhausted and totally burnt out but without a penny to show for it.
My attitude is to actually put up your prices!
“I can’t do that!” I hear you cry. Why not?
What’s the worst that can happen? Well, firstly you will lose some of your existing customers when you put up prices. However, the ones that you will lose will be those who always ‘buy on price’ and from experience I know that these are the customers that are really hard work.
These are the people who make you give an inward sigh when you have to see them or talk to them and the ones where you breathe out that sigh in relief when you say goodbye.
Whilst they might be lovely people they usually demand so much more and they are much, much harder work. Would you really be worried if you lost their business or would it be a bit of a relief? You really don’t want this type of customer.
The customers that you want are those that actually don’t do business with you because of your prices, they choose you because of the product or service you offer and the quality of that product or service.
You will have greater profits
Raising your prices will mean that you can afford to lose the demanding customers who pay very little and you will become far more profitable. Let me give you an example.
Say an hour’s consultation or a particular product is currently £60 – you would need to do four consultations or sell four products to earn £240 of revenue.
If you priced your consultations or products at £80 you would only need to do three consultations or sell three products to generate the same £240 of revenue.
You can afford to lose some customers and still make the same money
What this tells you straightaway is that you can actually afford to lose one in four customers and still be better off. And yes, I do mean better off because although you are earning the same amount of money you are only doing 75% of the work and paying out 75% of the costs.
However, what actually happens from my experience, is that sales figures won’t go down. Because you are only doing 75% of the work, you have more time to put more effort into selling another consultation or product at £80 increasing both your income and profits.
On top of that, you’ll be surprised how many of your customers won’t even notice you’ve increased your prices and those that do will probably say that they’re surprised you haven’t done it before now.
Find the right balance
But one last word here, over-charging can be just as dangerous as lowering your prices. I’ve seen business owners price themselves out of the market or put themselves under such pressure to deliver the high value service that equates to the price they are charging that it seriously affects their delivery and the customer experience.
The best way to build a thriving and successful business is to find the right balance for you and your customers. You need to feel comfortable about the price you charge your customers and your customers must feel that they are receiving value for money.
Until next time, remember ….
If you haven’t put up your prices for a little while, then you should do it NOW. I promise you’ll be delighted with the results.