One of the most interesting things I’ve learned in price strategy is that blindly relying on discount strategies can kill a business. Here are some thoughts to consider:
Make sure you know your product or service, and who’s buying
If it’s something people are going to get anyway, (i.e., your customer retention is high and they keep coming back again and again) it makes no sense to do a price drop. If your product is good, why drop the price if your customers are coming back… anyway? This is a surefire way to drop profit. Instead, try bundling with another product or promote a new add-on product with a discount.
It’s tough to compete with discount store prices. Getting a product in such stores does not go without serious price negations in favor of their extremely low prices. So why try to go that way? When you are starting a small business with a new product or service, price quickly communicates value. Try testing different price points to see the response you get. But start high- it’s easier to lower a higher price later on than the reverse.
Long term advantage
Higher prices mean higher margins. Higher margins mean you have more resources to continue developing your brand and improve on your product or service. Communicating what you do and the value you provide is key to success, but it takes investment to get there.
Take time to consider your pricing strategies, and don’t always jump to the conclusion that “low-cost” always wins. Communicate value with your price, provide value, get creative with other strategies, and invest in your brand. Low-cost can be a great way to generate customers, but may not be the best for a business in the long run.
Content contributed by Jessica Flint, SourceLink Tulsa
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