Thanks to 401(K) 2012 for the image
A lot of business owners engage in what is called ‘the race to the bottom’. It is the idea that the best business is the one that offers the lowest prices. Companies will do everything they can to offer their services and products at a super low price. You see it advertised everywhere. The problem is that when you race to the bottom, you get stuck there.
When you lower your prices too much, your profit margins become so low that you can’t grow. You can’t recoup the capital you invested. Quite simply, you can’t make enough money to successfully grow your business. Millions of businesses crumble through this technique. They run themselves into the ground trying to provide services at such low prices. Successful business increase their prices, and so should you. Do less, and make more.
Don’t aim to be the cheapest, aim to be the best
It’s a myth that cheap products buy loyalty. There is simply no evidence to support this. Cheap products inspire one-off, quick purchases, but certainly not loyalty. Loyalty is earned through good quality produce. When you provide services and products at low cost, you inevitably must compromise on quality. This is bad for your business in the long run. Business advice companies and CPA services in St. Louis will all confirm this.
Take a look at Apple. They are the biggest computer company in the world. They are also one of the most expensive computer companies. Their laptops, desktops, phones and tablets all cost more than their competitors. Yet they still lead the field. Why? Quality.
Start with small increases
Now that you know why you should increase your prices, how do you do it? You need to start small. Suddenly doubling your prices overnight will scare away all of your clients and customers. Simply make small increases to your pricing. When new clients come along, charge a higher price. Adding a little to each product or service will go a long way.
If you work primarily with clients, be honest with them about why your prices are going up. Thank them for their continued work but explain that you have grown in value and your price reflects that. If you have provided good work for them, they will understand and happily continue to use your services.
If you run a product based company, offer a menu of prices with your options. Show alternatives at a range of prices. You will be surprised how many choose the more expensive alternatives. With certain products (most products), people want a quality service. They want something that is built well and will last. They want quality and they’re willing to pay for it. Having an alternative shows that you do have a budget option, but that you provide quality too.
Raising your pricing could just save your business. It will allow you to increase your profit margins which can be reinvested. It will help your business grow. More importantly, it will let you focus on providing quality products and services. Don’t waste your time trying to be the cheapest. Strive to be the best.