Sunday, April 28, 2013

Business 101: WHY lowering your prices should be your last resort...


Okay....

I've read thoroughly over almost all the threads about pricing.  I've read the guidelines. I've read Paul's insight. I've read and read and now....

I'm dreaming about pricing when I go to sleep....which is making Ryan Gosling find other dreams to inhabit...which makes me sad.

So in an effort to get Mr. Gosling back where he belongs....here are some small business reasons why lowering your prices  in an effort to make money should not be on the top your list. Or even the middle.

And I've included a number of VERY interesting articles to read below from various websites who focus on business...lest you think I'm blowing smoke.

Reason #1: On this site, thankfully, price is not your ONLY competitive advantage.

Reason #2: If you only market to customers that are looking for really low prices, then that will be your customer base. When the point comes that you have to raise your prices, and it will indeed come from charging low prices over time, you will most likely lose a good portion of your customer base....which means you will have to start marketing all over again for another customer base.  (Remember.... At some point, 80% of your sales will eventually come from 20% of your customers)

Reason #3: Lower prices bring on the common human perception of lower value.  We all know that a lot of generic food items are made by the SAME companies that make the higher price items.  But it's sometimes difficult to bring our hand to grab it and put it in the cart because...."What if?".  I personally don't think that it devalues an entire market of similar items...anymore than Brand X Peanut Butter devalues JIF or Nutella.....but it can indeed decrease the value of YOUR item from the CONSUMER'S perception.  Sorry...that's human brain wiring.  Good luck trying to undo that.

Reason #4: Lower your prices....and you will have to REALLY INCREASE your marketing efforts to attain the same profit you had when you had higher prices.  Time=Money. Time spent having to constantly market because of lost profit means time spent away from creating new materials.....which customers will be looking for if you wish to remain competitive.

Reason #5: You may not realize that your customer's actually LOVE your products and are willing to pay the higher price.....just not this instant.  Again, there is a laundry list of reasons why people buy...and don't buy.  A lot of us have been in this scenario. You decide to have a garage sale. You spend all week cleaning, pricing, setting up,...the works. The day comes and you have set out....let's say...a really nice bedroom set.  You paid $1500.00 for it...and now you are selling the whole thing for $300.00. A great deal. Fair price. You are making a good chunk of money for something you don't need. But as the day wears on...lots of lookers....lots of compliments....lots of interest. But no sale. Finally one guy asks...."Will you take $100.00?". You hate to do it. You sweated getting it out. It's in awesome condition. It's a great deal at $300.00.  But you think if you don't take this offer...and it's getting to the end of the day...you won't make any money. Desperation sets in. And so does your migraine. And dagnabit.. little Junie needs to go to band camp. So you take the offer. And help crush the set into his station wagon.

And then what happens?

You guessed it.  This young (and strong) couple shows up with $300.00 and a pickup truck ten minutes later to buy the set because they had thought about it and now were acting on it....as the guy pulls away smiling at his good fortune.

Moral: Patience is a must in the business world. Especially before you lower your prices.

And having an occasional sale is a great tool. Occasional.  It's not a long term commitment. It's good reward for existing customers and a great marketing tool for new ones. 

There are many other things you can do.  I have taken the liberty to find these GREAT articles that discuss all the other things you can do besides lower your price. Some will probably even shock you.  Enjoy!

Rebecca smile

Increase Sales without Lowering Prices
http://www.salessherpas.com/blog/?p=33

How to Increase Sales without Focusing on Price
http://www.bizreport.com/2010/11/how-to … price.html

How to Raise and Lower Prices
http://www.entrepreneur.com/article/66010

Gaining a Competitive Advantage without Lowering your Prices
http://www.webstarcorp.com/the-webstar- … our-prices

Lowering Prices will not Increase Profits
http://www.marketplace.org/topics/busin … se-profits

What to do when your Competitor Lowers Their Prices
http://www.marketingdonut.co.uk/marketi … eir-prices

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