Successful small business owners know there is a delicate balance between customer service needs and maximizing profits. In an ideal world, attracting new customers and maintaining existing relationships happens in sync with a rise in profits. In reality, a low pricing strategy may increase customer interest but result in lost revenue, while a high pricing strategy may alienate customers. For help with determining the best pricing plan for your business, read on.
How Do I Make a Profit?
The rule of thumb to increase profits is fairly straight-forward: do your research and sell your brand.
Do Your Research
- Market research: Market research is essential when it comes to pricing. Look at national, regional, and local industries to determine pricing baselines for your goods and services. On the other end, find out the ceiling price – the highest price that customers are willing to pay for your goods and services. An honest assessment of your pricing baselines will help inform the decision of where your prices should fall. Start your search online, looking for industry standards and publications.
- Benchmarking: Benchmarking is also a valuable tool to compare your goods and services with your competitors’. Competitive analysis and competitive pricing will help you determine how your prices compare to local, regional, or national competitors.
- Factor in All Costs: Remember to factor in all costs including office space, equipment supplies, and fringe benefits like social security and health insurance, environmental demands like legal and tax constraints, when deciding on your pricing policy. If the price that you would like to set does not meet these costs demands, you may want to reconsider your pricing strategy or figure out a way to rectify your cost needs and pricing goals. Learn more about developing a marketing budget for your small business.
Sell Your Brand
- Brand Exclusivity: What makes your product or service unique? Why should customers buy your product or service instead of a competitor’s? Unique business concepts and services may help protect your business from falling industry prices- because customers are more willing to pay higher prices for niche goods and services they cannot find elsewhere.
- Reputation: Develop a good name and reputation for your products and services. Customers would be willing to pay more for a brand they trust and/or are more likely to become repeat customers.
How Do I Attract and Maintain my Customer Base?
Selling your brand – developing brand exclusivity and a good reputation – attracts customers. However, to keep the customer base that you have developed requires (1) a customer reward system; (2) clear communication.
- Reward Customer Loyalty: Customers like to feel special and unique. You can especially by being rewarded for their loyalty to your product(s) or service(s). Discounts for repeat customers are a good way to build long-term relationships with loyal customers. Read more about reaching out to customers with the 30/30 retail rule and holiday marketing tips that don’t break the bank.
- Communicate Your Services: Communicate the uniqueness of your products and services to attract customers into doing business with you by honing your elevator speech. Be straightforward and transparent with fees and other charges; it is a gateway to superb customer service in keeping customers happy.
When you are planning your pricing policy, keep in mind the two important factors of high profits and a strong customer base. Remember to do your research and sell your brand to improve your profit margins, but don’t forget to reward customer loyalty and maintain outstanding customer service to keep up with those gains. At the end of the day, the two go hand in hand in ensuring the success of your small business.