The decision to lower or raise prices for your services is a tough decision for any seller. And depending upon one’s decision, it can bring positive or negative effects on your business. Even so, it becomes inevitable at some point of time for the seller to make that decision in order to go forward and earn better.
Unfortunately, to raise the price or to lower it is not exactly a question which can be answered with just a simple yes or no. While making this decision, one needs to dive in and look into all sorts of factors that can affect the business for better or for worse. Furthermore, there might be times when you need to price different things differently in order to create a better balance.
So, the next time you face such a dilemma, here are a few tips about the do’s and don’ts of pricing your services.
Decide on how much change is required in your prices. Different strategies are required in different situations. For example, when companies announce a large increase in prices, this could be due to many different things. The price may have increased do to an increase in price for a single ingredient of the product. Or, a price increase may have been announced in order to reduce the demand for a single or a set of products that may have become unexpectedly popular. In any case, a price increase is done while keeping in mind that the customers will get accustomed to the price increase over time and they would become more willing and tolerant as time passes. On the other hand there are companies that raise the prices ever so slightly, in a way that is almost unnoticed by the customers, since they feel that a large price increase might end up putting off the customers.
Do let your customers decide
Before deciding to hike the prices of certain products, look at how the customers rate the product. A product that is liked by the customers is likely to sell even if the prices have increased a bit.
Do keep in mind as to when to increase or decrease the prices
The next thing you need to look into is picking the right time. For example, in case you are considering lowering the prices of a certain product, think about when would that have the best impact. Similarly, while raising the price, you would need to choose the time when you would get least resistance from the customers. However, a starter company should delay price increases in order to attain a loyal group of customers.
Do estimate the value of the product
Define the value of a product as the customer perceives it. In other words, you cannot just randomly go around and raise or lower the prices. This activity only has value when the customer finds value in the product and is ready to pay extra for it or, can pay a little less depending upon circumstances. So, basically, you will realize that the price and value of a product are often linked.
Do not hike or lower the prices of all commodities at once
If you have some products that you need to raise prices of, then you should consider leaving the same price for some other products or ever lowering the prices of other products. A reason for that is, you might find some customers to be very sensitive to price increases of certain items while they are indifferent to other items that might or might be associated with it. A good example would be how automobile companies cut prices on cars and charge through accessories to make more profit.
Do not hesitate to raise prices
According to statistics, at least 75% of US restaurants have underpriced commodities. They hire less staff and keep things underpriced which ultimately results in a poor customer experience.
Do not underestimate the importance of good service
If your customer does not leave satisfied at the end of the day, there is a high possibility that they won’t come back again. Prioritize customer experience above all else and provide a service that is comfortable, convenient and reasonable to afford.
So, these are some of the important factors that will help you decide whether or not to increase or decrease prices. While many businesses earn more by increasing prices, there are companies that earn by decreasing the cost as well since this offers the customers irresistible offers while simultaneously giving a chance to the company to earn their profits. Either way, careful attention needs to be given when dealing with this in order to not lose your customer base and profit from it at the same time.