Small businesses play a vital role in any country’s economy. A significant percentage of most governments’ annual revenues is derived from this sector. The unfortunate part, however, is the fact that many of these small and medium enterprises don’t generate a lot of money for their owners. In fact, this is one of the reasons why most of them don’t survive the initial stages of growth.
If you’re in the early stages of building your business, it’d be prudent to find the pricing strategy that not only generate profits but also enables you to attract more customers. The plumbing industry, for instance, has become quite competitive in recent years despite the ever-growing demands. If you’re looking to venture into this sector, you’ll need to find ways of beating the competition.
Investing in good software for plumbers, for example, will ensure that you dispatch estimates and carry out other related tasks a lot faster than your competitors. Another important aspect is your pricing structure. How much should you charge for your goods and services to remain competitive? There are many things you’ll need to consider before making this decision. That said, in this post, you’ll learn some pricing strategies and how you can fit them into your business.
1. Premium pricing
Every business would like to maximize its profits, and the best way to do that is by coming up with a unique product. The most ideal strategy for such goods and services is premium pricing. For one, since you’re the first one to sell it in your area, you’re likely to attract many customers regardless of the cost.
Both small and huge companies use this strategy in the introductory phase of a product. It’s imperative, however, that you prove to the consumers that your product will provide them with different features from other regular alternatives. Of course, in order to increase your cashflow in such a scenario, you’ll also need to raise your marketing bar and make every employee a salesperson.
2. Competitive pricing
Many times, the entry price of a product determines the total number of sales and its ultimate success in the market. However, there are several other factors that’ll always play a role in one way or another. Competitive pricing, therefore, is all about selecting a sweet spot in the price range considering the buying power of the target consumers and competition from other dealers.
In this strategy, you have three options, charge a lower, current, or a higher value as compared to the market price. Of course, most small businesses choose the first option, hoping to generate a lot of sales. Unfortunately, that’s not guaranteed, and you might end up in the red. The other two require a lot of marketing because you’re trying to convince a consumer to get a product from an unpopular dealer when they can get it at the same or even lower price from someone they already know.
3. Psychology pricing
Everyone has fallen for this trick at least once in their shopping adventures, which makes psychology pricing one of the most effective strategies used by businesses today. As the name suggests, it ensures that the customer purchases a product based on their emotions rather than logic.
For instance, an item selling at USD$300 dollars might have a price tag of USD$299. If you think about it logically, the difference between the two values is almost negligible. However, customers tend to see the first number rather than the whole value, especially when they’re shopping for many products. In the consumer’s mind, USD$299 is lower than USD$300, which is true, but the business will still make profits.
One of the things new entrepreneurs should know is that their pricing strategy is what will lead to their success or failure. As a startup business owner, you ought to come up with a strategy that you feel will generate profits and at the same time encourage the growth of your business. Remember, there are many pricing strategies, but not all of them are ideal for your business.
Competitive pricing, for one, involves selecting a strategic price point that’ll favour you and the target consumers. Of course, you must keep in mind the activities of your competitors in such a case to avoid excessive losses or lack of market. Premium pricing is all about setting the price of your unique product a little higher than the normal cost. Psychology pricing focuses on the consumer’s emotions rather than their logical view of the price. Whichever strategy you choose, be sure to invest in marketing because that’s the only way you can have a chance of beating your competitors.