When you run a small or midsized business, it can be hard to determine the best pricing methods for your products or services. Charge too little and you may lower your business's profitability; charge too much, and you may drive potential customers away. So how do you decide on the right price? While there's no single correct answer to that question, these four tips can help you choose the most effective pricing methods for your business.
Sell Your Service
Large businesses often have the benefit of buying and manufacturing in bulk, which can help to drive down their costs and allow them to lower their prices. However, being small has its benefits, too; for example, small businesses are often able to offer a more personalized customer experience, and that personal touch can help ensure that quality stays high. These are the things that can help set you apart and drive loyalty among your customers. Offering coupons and other enticements, such as sales and introductory prices, can help you grow a loyal customer base that understands the value of your goods and services and is ultimately willing to pay a slightly higher price point for the better quality your business provides.
Offer Membership Pricing
Offer customers the chance to buy an annual membership that gives them a small discount on regularly priced items or lets them earn points toward discounts and other rewards. This can help encourage repeat business, and the membership revenue can often make up for the discounts. According to the 2016 Bond Loyalty Report, 66 percent of consumers in loyalty programs claim to spend more than they intended in order to maximize points.
Bulk It Up
Pricing methods based on bulk selling work for membership-only warehouse clubs, but they can also work for small and midsized businesses. In addition to setting a price for each of your items or services, consider when it may make sense to offer a package deal. For example, if you charge $25 for a manicure, you could offer three for $70; by spending more at once, your customer can save $5. This can be a win-win situation for all parties: your customer will likely be happy that they received a small discount, while you've helped increase your sales.
Selling something completely unique helps take some of the pricing pressure off a small business owner. If you know other restaurants in town offer burger-and-fries deals and use frozen ingredients, but you use fresh beef and potatoes from your Uncle Henry's prize-winning farm, advertise that. If no one else in town is offering organic, local produce, it should be reflected in your marketing — and your pricing. Consumers will likely understand and respect the markup.
When choosing pricing methods for your business, always take operating costs into account, and adjust your prices as these costs fluctuate. A common mistake is to start with a low price, with the intention of taking a loss while building brand awareness. Don't price yourself out of making a profit — even a small one is vital to the continued success of your business.
If you're looking for more pricing recommendations, check out this article, which contains additional tips and strategies for building a fair pricing model.