Tactics to Avoid Lowering Your Prices Should you or shouldn't you? These strategies may help you find ways to avoid slashing prices.
Many small businesses find themselves feeling pressure to lowertheir prices. It may come when a low-priced competitor shows up inyour market, or when a pinched economy hits your industry. Yet fewsmall businesses can afford to get themselves involved in a pricewar.
There are a handful of times when dropping prices makes sense;for example, when your cost of doing business has dropped and youwant to pass along these savings. But if your existing prices areset to cover expenses and necessary profits, lowering them coulddamage the bottom line. What's the answer? Consider using thesetactics to attract and retain customers without getting out the redpen.
Emphasize customer service
By demonstrating the added value you give customers, you may beable to justify higher prices while keeping the competition at bay.You can showcase superior customer service through generous returnterms, longer than average warranties, free delivery, expressordering for regular customers, or other customer care techniques.This tactic is more strategic than getting into pricing wars withcompetitors because it encourages long-term client relationships.Competing on price often leaves companies catering to ficklecustomers who may or may not return in the future.
Package products and services together
You can create more value for customers by grouping relatedproducts and selling them for a price that is greater than anysingle item, but less than it would cost to buy each oneseparately. For example, a bookseller might package elegant penswith journals or a dictionary with an atlas and thesaurus. Thistactic can help you avoid permanently reducing prices on any singleitem while increasing your overall sales.
Decrease amount along with price
If you find the market is demanding lower prices, consider whetheror not there is a way to offer goods and services in smalleramounts. For example, if you're a Web designer, are thereefficiencies you can build into the project development processthat would allow you to offer services at a lower cost? If you sellbeauty supplies, can you package products in 6.5-ounce containersrather than 8-ounce? This tactic can give customers the perceptionthat you've lowered prices while helping you to keep costs inline.
Add services
Instead of cutting prices, maintain them and include an additionalservice for the same amount. For example, a bookstore owner mightoffer free gift-wrapping with each order, or a personal trainermight offer an hour of nutrition counseling with the purchase of 10sessions.
The viewsand opinions contained herein are not necessarily those of AmericanExpress and are intended as a reference and for informationalpurposes only. Please contact your attorney, accountant or otherbusiness professional for advice specific to yourbusiness.
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