Should we raise our prices or maintain our existing prices in this economy?
My wife and I have been running a food business (crepes) for seven months. We started with a penetration pricing strategy, setting the crepes' price below that of other competitors to gain market share. It worked because we were still profitable. But with the economy worsening, the price of ingredients is also soaring. We raised the price while still keeping it below our competitors' prices, but we are in survival mode because the profit is very thin. If we raise the price again then our price will be the same as our competitors, but our market share is still far from what we expected. What should we do? Raise it again or hold on ?
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The way around that is to raise prices and justify it by delivering more value than your competition--whether it is the quality of your crepes, your service, or the "added value" you can "give away" to customers, realizing that you are not really giving away anything . . . but rather enhancing the customer experience.
Creating a niche for yourself as a "premium" provider means you can enjoy higher margins while creating a brand and identity for yourself in the market.
Realize you'll lose some customers when you raise your prices; you always will. But they will "price shop" at your competition, and then your competitors will have to struggle with the fact they have more customers, but are serving them at a loss--a strategy you have already tried.
All the best. Brad Sugars.