Lowering the price of your goods and service to stay competitive may be a sure way to stop your growth. That’s almost as bad as saying “I will lose money on each transaction but I will make it up on volume”.
Too many small business owners seek the easy way out, price cutting! It’s alright to study your competition and analyze what they are charging for their services or products. It’s not alright to set your prices based on those of your competitors. If you are doing that, then you are in the wrong business.
When a client tells me “I need to lower my prices to be competitive” my answer is “Tell me what has to happen for your price to be worth paying?”
The economy is not an excuse for lowering your price. I believe that people buy value and will pay for it if it provides the benefits that they desire. No, you can’t be everything to everyone; but if you have identified your target market and fully understand their needs and values, then you can charge a price which will allow you to maintain and grow your business.
How do you want to be branded by your target market? Stop and write a few sentences right now…… give this process at least 15 minutes. When you finish, stop and read what you wrote. Are all your marketing efforts geared to convey this message? Are you a “high end” or a “low end” provider of products and services?
Next comes the nasty word “budget”. At what price do you have to market (sell) your products or service to meet your income and expense projections? Don’t forget to include in your expense column all expenses including compensation for the owner, a reserve account and company profit.
Once all this information is compiled you can determine the minimum price for your products or services and also what your marketing goals should be.
Now take the time to review your current marketing plan and, if necessary, create a new one that is geared to achieve your objectives.
Do it NOW. Time is money. Work smarter, not harder. There’s always enough time for the important things. Alan Lakein
Nick J. Petra CFP