Managing Your Pricing as a Small Business Owner

Pricing is one of the biggest causes of stress for any business owner, but particularly for smaller, owner managed businesses. Price yourself too high and you will struggle to find customers, but price yourself too low and you will run yourself into the ground for a pittance. But, price your products correctly and you could enhance how much you sell, creating the foundation for a business that can be truly successful. It’s one of the hardest things to do, and unfortunately, it’s one part art and one part science, with no one right answer. However, we can give you some tips we’ve picked up on my travels that might help you navigate the treacherous pricing waters – especially if you’re just starting out your post-pandemic business.

Initial Price Pointing

Whether you’re first starting out or just bringing a new product/service to market, identifying the right price for it can feel impossible. There are a variety of different pricing strategies in business, and what works for one business may not work for another. For example, you may want to package your products or services, sell them all separately or set prices based on an ad hoc model. Whatever you choose, you should make sure you:

Do Your Research: The most important part of the pricing process is knowing your market, so do your research. Understand what your market can afford, what they would expect to pay and what they would be willing to pay for products or services like yours. This will help you find the ‘sweet spot’ for your market. You should also check your competitor prices so that you can decide whether to beat or match them.

Choose A Good Technique: There are a few techniques to pricing, For example, cost-plus pricing involves adding a markup percentage to costs, whereas value-based pricing is determined by how much value your customers attach to your product. Decide which approach is most suitable for your products before you start deciding what to charge.

Consider Other Factors: There are some hidden factors you might not have considered. For example, will you need to register for VAT, and how will that impact your pricing? Will you be able to keep the margins modest on some products to achieve higher margin sales on others? Will you need to create different prices for your services depending on territory or industry type, or how those sales arrived with you?

Managing Price Rises

Of course, as your business develops and grows, you may find yourself faced with a dilemma – your prices aren’t right anymore. Pricing is very seldom set in stone, and a time will come when you need to alter your prices, usually by putting them up. But you can’t just change the price of your products and carry on as before- you need to manage that process within your business, and with your clients. There are a few ways to manage a price rise that can help ease the process and retain current customers:

Understand Your Customers: There are at least 4 ways a customer can react to a price increase – they can downgrade their service to something within their budget, they can use your product or service less often, they can accept the higher rates or they can stop using you altogether. Having worked with your customers for some time, you should be able to gauge how you think the price increase will affect them, and put measures in place if you need to. For example, you could offer your longer-term clients with a limited budget the chance to stay on the old pricing structure for a set time, or offer a more gradual price rise process.

Unbundle: customers who previously welcomed the convenience of buying product, options and services rolled into one might not ask for a more detailed price breakdown. Make it easy for your more price-sensitive customers to better cherry pick the options and services that they truly need by giving them an unbundled menu of options.

Reinforce Relevance And Value: In the run up to your price rise, invest in some marketing and PR for your business. Instead of generating leads, focus this campaign on reinforcing the value of what you provide for your customers and its relevance to their business or life. By doing this, you reinforce your brand in their minds, remind them of the reasons they buy from you and motivate them to stay with you when you increase your rates.

Give Plenty of Notice: In product based industries, prices change rapidly and consumers are used to this model. However, in the service based industries, it is less frequent. So if you are planning a price rise, ensure you give all of your customer’s plenty of notice. The notice allows them to plan for the increase and get in touch with you to talk through options. This means that you have the chance to retain more customers, instead of losing price-sensitive buyers to a knee-jerk reaction.

At Your Admin Hun, we don’t just provide basic admin services. We act as a sounding board for your business ideas and a strategic problem solver. We’ve have worked with businesses and individuals from all walks of life, and have gained a lot of experience in helping them make the transition to higher prices. By making this process as smooth as possible, we can help business owners make more money for their time, and gain valuable time back. If you would like some help or advice around initial prices or raising your prices, get in touch with the team today for your free consultation – tea and biscuits on us!