Easy pricing strategy and the best way to increase your prices

It’s much better to undertake proper market research that can tell you what the competition is charging and what your customers would be willing to pay. You also need to know what your business objective is, whether it is to:

• Increase or hold your market share. This choice means you might have to sacrifice some of your profits and possibly charge less to certain customers.

• Maximise your profits. This means you’re aiming for as much profit as you can from a product or service, charging as much as you can.

Armed with this information, you’re in a much better position to price accurately. When your prices are high enough to cover costs, give you a reasonable return, and are attractive to customers, you know you’re winning.

Pricing low

If your pricing is lower than your competitors', consider why that is. Is it just that you’re lacking confidence? If you raise your price, up goes your profit margin.

Pricing low can work, especially if you are aiming to grab new customers. But if your competition includes larger businesses with deeper pockets, they’re always going to win the price war. You also don’t want customers perceiving your goods or services as lower quality than the competition.

If the competition are targeting your customers, you may decide to compete head on with price.

What you need to know before you increase your prices

Increasing prices widens your margins and frees up cash you might need for business growth. You should always be seeking to increase your prices over time, so that you can improve your profit margins and keep up with inflation. What you don’t want to do is alienate your customers by increasing them too dramatically, so keep the following in mind when you’re considering a price hike:

• If you’re going to price higher than the competition, you could risk having customers go elsewhere, but if you still get enough customers to make a profit (and you’re doing less work), it could still be viable. But you need to convince customers that you’re worth the extra money. Use your unique selling point – whether it’s great customer service, free delivery, or a superior product – to help show customers why your product is worth it.

• Try to find ways to reduce your costs before you increase your prices. Things like reducing your energy use or changing providers, cutting down on travel expenses, removing poorly- performing products from your inventory or selling assets are all ways to do this.

• Make sure you’re providing the best customer experience you can. So make sure your staff are on the ball – perhaps even give them quick refresher – and remember to provide them with everything they need to do their job properly. Make an effort to know your best customers and deal with complaints quickly and efficiently.