How Can I Turn Price-Sensitive Shoppers Into Customers? A business is having trouble with sales after expanding into a new market. Ask Entrepreneur's business operations expert offers ideas that are right on the money.
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I own a company that specializes in stylish, high-end furniture. We expanded into a market that is particularly price sensitive. We are not reaching out to our target market as advertising budgets are low due to low sales revenue. Should I ask our lender for more funds for another advertising campaign to directly target this market or do I look at our pricing strategy, possibly lowering prices to open ourselves up to the market we have approaching us on a daily basis? To help close sales, we recently started offering heavy discounts, even to customers who aren't asking for them. People tell us they're happy with our quality and service, but they're still put off by our prices. What should we do next?
Entering a new market can be an exciting yet challenging endeavor for any company. Specifically, many companies run into problems when they allocate too many resources to an unproven product, which in turn detracts from their existing business or what is currently working well. I'm encouraged that you're taking a step back and trying to identify the best approach to target this new market.
As to whether you should focus on your pricing strategy or advertising to attract sales, I would recommend the former since advertising can be very expensive when you're testing a new market. Furthermore, the feedback that you receive from even a small sample of customers can be much more valuable in converting future sales opportunities.
Based on your question, I would imagine that you're targeting a mid-to-lower end consumer as they're very price-sensitive. You need to be cognizant of the fact that most of these consumers are focused on value. They may think your prices are high because they don't believe they're getting enough product/features for the cost. Before you slash prices, I would recommend first trying to offer additional value. What does that mean? Instead of selling one item, try selling two items as a bundled offering with a slight discount. This approach can be very helpful as the consumer is happy that they're getting more for their money. In addition, I would also gain an understanding as to what your competitors are offering this same customer.
I would also recommend creating a greater distinction between the high-end items and your new product launch. It's very difficult for the consumer to become comfortable with a product when they don't understand the company brand and the different price points. Remember, you always want to try to make the sales process as easy as possible. Your current strategy may be too confusing for this new customer as the brand still attracts the high-end consumer.
You need to get in front on your target audience with a cost-effective and thoughtful marketing strategy. Your existing customer base isn't the answer. Try first experimenting with inexpensive distribution channels such as social media, consumer-related blogs, and working with affiliate partners. The sales may be slow in the beginning, but it should increase gradually as you're targeting the right audience. Even more, you'll be learning more about who your target audience really is without testing it with an expensive advertising campaign.