Pricing can also cause a small business to rise rapidly and run out of time. Choosing the right pricing strategy is one of the most critical points for small businesses. Let’s say you set your pricing strategy and have a reasonable margin of profit, but then it didn’t work out, and that left a hard damage to your brand. Perhaps your successful-looking pricing strategy actually failed.
So what possible dangers should we avoid when determining pricing strategy?
According to Carl Reader, The author of the startup coach, the first and most important step in determining the pricing strategy is to decide: Are you a cheap commercial company or a high-quality company? Make sure that the market you are in or intend to enter is clear or your price policy may be wrong from the start.
Avoid being in the middle of the price. Nobody wants to be cheap enough to damage a prestigious product, and expensive enough to scare those who know the value of every penny. Then what you need to do is look at the average of the target market for the product/service you recommend. So you can be sure you can’t make a profit.
According to Stephen Nightingale
Low pricing can be very tempting for a lot of small businesses, but this rarely results in a good move. It is usually very difficult to make a profit with low pricing. Nightingale also said, “ If you are neither hurt nor profit, it does not contribute to the growth of your company and if your prices are too low, the amount of profit you make is going.”
Making great discounts at prices can be a tactic that is often used by small businesses. This may increase sales and help cash flows in the short term, but according to marketing advisor Claire Boyle, you should not consider reducing prices as a habit. “After a while, your customers will realize that all they have to do is wait a little longer to get a discount, and this will negatively affect your turnover.”
Of course, there may be exceptions in this case. Initial prices can be a good start for small businesses that are still newly established. For example, we can give Lindsey Bauer, who produces special baby stroller for traveling with his wife.
According to Bauer
The original price for the company’s first product was set to £375. This market, where competition is high, is almost saturated with an initial price of £225. They say the company is selling with this initial price until the beginning of the previous year.
“Since our sales and brand awareness began to rise more than once, we provided sustainability that would allow the price increase we planned for the future,” said Bauer. In the coming months, they plan to raise their prices with new models.
When determining price strategy, it is critical to understand the price strategy of the competitors. Tom Meehan, a hotel management software owner, said: “customers will compare prices to your competitors. If your price is lower than them, they will ask what they are missing in the service or product they receive. If it is high, they will question the extra advantage of the service you provide or whether you are offering a truly better product. And if customers choose you, you should have sensible answers to all these questions.”
Competition with competitors on price may not always be a good idea for small businesses because “big companies can always give a good price. They can deliver quality products cheaper in a short time because they have a very high chance of working at low volume and winning from the version” — Boyles.
According to Cath Janes
The Founder of Kraken creations, selling online boutique accessories, it is not logical to enter the competition. Especially with competitors who offer the cheapest price and are ready to lower the profit margin by pulling the price further down. Because if you enter price competition with them, you may need to do activities that will lower the value of the product you offer.
“Instead, I show my customers what stages the product is going through — from initial sketches to fabric selection, from molding to sewing and the latest packaging. So I make sure my customers understand why I want this price, and I’m proud of it; I’ll always produce products worth paying.” — Cath Janes.
Dawn Baird agrees with the others. “Having a lower price than your competitors, you are less experienced than your competitors or produce the quality of the product you do not believe in the perception that you can, in this case, why do you believe in the quality of the customers?”I don’t know.”
In a market where competition is high and consumers have everything they need, pricing strategy should depend on the value the product will add to the customer, not market trends or competitive prices.
”The value-oriented pricing strategy allows you to describe how your product/service will contribute to the lives of customers” “ — Kubi Springer.
Make sure your customers are satisfied with the product you are offering.
Add extra features and improvements.
Prepare for unexpected results in advance.
The only way to return from the wrong pricing strategy is not to lower or raise prices. You can also consider cross-sales, down sales (making a lower-than-consistent sale first so that you can return the customer and sell a more expensive product), and up sales (adding a more expensive product to the base package you sell). It can also be a good move to make strategic partners with brands that will allow you to make cross sales.
The correct pricing strategy takes into account the actual cost of running the company and prioritizes the profit margin. Also protects the future of the company. Your profit margin keeps you above the water, and the right pricing allows you to make future plans.