Superstores and large conglomerates dominate almost every city and town among us. It makes it hard to stay afloat when you may not have the same resources or finances. But don’t worry— there are still ways to make the most of what you have and increase your margins, to boot. Here are some ways to flair up your prices:
Determine Your Pricing Model
The first step is to determine what type of business you are. Do you primarily give away goods or services? A combination of both? Primarily shipping and handling?
According to the Balance Small Business, here are some ways to categorize your pricing models:
- Cost-plus pricing: The selling price is determined by adding a markup to the unit cost. Ex) A countless array of grocery and department stores utilize cost-plus pricing to capitalize on a higher gain for lower-priced units.
- Competitive pricing: Setting a price based on the price of the competition. Ex) Look no further than Amazon and their pricing practices; the retail giant utilizes competitive price information to implement low product prices.
- Value-based pricing: The price is based on the perceived or estimated value of a product or service. Ex) Designer brands like Gucci are perhaps the best example of this pricing model, with heavy emphasis on customer loyalty, elevated prices, and high quality.
- Price skimming: Setting the price high initially and then lowering as competitors enter the market. Ex) Apple priced its brand new iPhone 12 at $1000 while simultaneously dropping the prices of the iPhones 7-XS to $600-700.
- Penetration pricing: The price is set low to rapidly enter a competitive market and provoke word-of-mouth recommendations, only to be raised later. Ex) Netflix’s subscription price varies over time, yet customers remain with the service for their diverse media content.
Additionally, their are other ways to consider your pricing based on your services (according to Vistage):
- Hourly pricing: Service businesses can offer hourly pricing and invoice clients for all elements that were required of the “hour”.
- Fixed pricing: Charges clients a set price for a particular ordered service, regardless of how many hours or resources are devoted to the service (essential to truly understand costs, if not, business could easily end up losing money).
- Performance-based pricing: Customer or client is charged based on how the particular good or service performs (very exclusive situations, can be used and enforced through detailed contracts), true identity of business should be known, shouldn’t be pressed by the consumer.
Keep the Customers Involved
80% of your revenue comes from 20% of your customers— the old 80/20 rule. But the facts ring true. Although your regular customers may only spend a fraction of their time in your business, you want to make sure you stay in their hearts and minds.
- Stay in Touch
- Most email services give the option of automatic sending, allowing you to regularly update your customers on new and existing offers your business has to offer.
- Keep Them Recurring
- Subscription models work well for a reason. You may not be a streaming service, but that doesn’t mean there aren’t incentives to keep your customers coming back. Consider having a membership, or offering exclusive discounts for those who come back regularly. Loyalty programs using things as simple as punch cards (buy 10, get the next one free) can get the ball rolling on higher retention rates. Consistent communications guarantees revenue and offers a promising outlook for future visits.
Give the Correct Discounts
Deals are great and keep your customers coming back. However, it is necessary to ensure that discounts are not given at the expense of profits. If your business is one that primarily ships out products, consider giving discounts on shipping rather than the actual product. This enables saving on bulk shipping and still collects full product costs.
Bundles can also be your friend! A full size product and a travel-sized mini can give the impression of getting more for less. Don’t be afraid to mix things up and play around with what you have!
Keep the Competition Peaceful
While prices are determined by their own competition, it is better to not get swayed by everything your opponent is doing; find unique ways to stand out and be original from your counterparts. This could be through something as simple as finding exclusives that become immune to price drops. Narrow down what your customer base really wants— keep up on your market research and cut what your customers no longer want or desire.