7 ways for small businesses to increase prices without losing customers
The prices you set are are without doubt the most important numbers in your business. You absolutely must get these right. The wrong price is the single biggest reason why many small businesses struggle or even fail.
There are many strategies you can use to improve your business (some of which you will find here http://bit.ly/3rf74uK), but when you get the price right, you’ll transform your business overnight. It’s instantaneous. However, you might be surprised at how and why this happens…
To prove that setting your prices is one of the most important things you will ever do, let’s start by looking at an example.
ITelCo has commissioned some market research, which suggests that they have two options:
Option A – They could increase their sales volume by 20% if they reduced prices by 10% to £90, or
Option B – They could put up their prices by 10% to £110, but then would lose 20% of their sales volume.
When we ask them what ITelCo should do, most entrepreneurs have no hesitation in saying something like: “Go for option A. It is always worth selling more, and anyway, ITelCo gains more in volume than it loses in price, so it must be profitable”.
Are they right? Unfortunately not. And it’s because so many people get this question wrong that their businesses get into very real trouble.
So let’s continue with our example by seeing what the profits will be next month under each of the two options.
As you can see, under option A (i.e. the price cut) ITelCo makes a loss and is heading for disaster. It is actually worse off than it was before the price cut. And it is much worse off than it would have been if it had increased its prices.
There is nothing very special or unusual about this example. It simply illustrates a fundamental point that is all too often overlooked: stimulating sales by cutting prices may boost your top line turnover, but it can just as easily devastate your bottom line profits.
This can show the importance of correct pricing, but you may be thinking I worked hard to get these customers, I really don’t want to lose any!
This is where our list of strategies can help you. check them out 👇🏼
1️⃣ Have a price discrimination strategy
So what is this and why does it matter, let me explain….
Example: You decide to have one price for either your monthly support or a quotation for a project.
Prospect 1 accepts this price without any question – In this case could you have charged more and therefore have missed out on additional profits?
Prospect 2 finds it too expensive – In this case you loose the client as they maybe wanting a more basic service
The point is different people are prepared to pay different prices so don’t make the mistake of only having one price.
So, how to charge different customers different prices?
⚖️ creating different versions of your services at different prices
⏰ charging different prices for faster or slower response limits
🚦 creating bundles to increase the value perception