When you are looking to increase your profits, many business owners consider two main strategies. The first is costs – how can they reduce costs to increase profit margins. The second is sales – how can they improve sales to earn more revenue and sell more products.
While these are good options; they do carry risks. Lowering costs can reduce the quality of products and services. Selling more can require significant investment and doesn’t guarantee increased profit, especially if you are at capacity and would need more staff or equipment to deal with more customers.
The other alternative, which business owners tend to forget or don’t want to consider, is to change the pricing strategy. This doesn’t mean necessarily to raise prices, but sometimes to change services and how you price them.
The advantages of changing your pricing strategy over the other two options are that there aren’t any expensive investments that need to be made, your sales team aren’t pressurized to perform better, and you don’t risk compromising the quality of your product or service.
One example of this is what is known as shrinkation – where brands are offering the same product, for the same price, just less quantity. While this helps to reduce costs, it has caused some complaints from customers.
While not every industry allows the “seller” to choose their price, as is evidenced by the healthcare and insurance industries where certain standards are set by government regulations, the services offered can be improved upon to improve the overall experience of the customer or patient thereby having a positive ripple effect on the overall business profitability.
Loss Of Customers
Many business owners think that when they raise prices, their customers will abandon them. However, this isn’t always true, customers will likely remain with your brand even after a price rise, if you meet other criteria.
For instance, if you’ve exceeded their expectations during your current services – they will prefer to stay with your brand. Likewise, if you offer a unique personal service, this can benefit you too.
How To Avoid Customers Abandoning Your Brand When You Change Your Pricing Strategy
To avoid abandonment from customers during a price structure change, you need to communicate changes with customers. Don’t focus on the price and don’t explain it. Instead, look at what your customer is getting instead. This type of marketing is more positive and helps to sell your products.
So next time you need to generate more profit. Don’t look at how you can lower costs or sell more, instead look at how you can restructure your pricing strategy and earn more money.