In order to be competitive in today’s marketplace, small business owners need to be very thoughtful in their pricing. With the proper pricing strategy, a small company can turn casual shoppers into regular customers, and they can minimize the effect of sticker shock that consumers feel when making a purchase with an organization that can’t offer the same deals as a large corporation.
Check your competition’s prices
As a small business owner, you won’t be able to offer your company’s products and services at the same price as a large corporation that can buy in bulk and sell their merchandise at a loss to drive traffic. However, this doesn’t mean you shouldn’t know what your competitors are doing. By knowing what your competitors are charging for their products and services, you’ll have a good idea where the low-end and high-end of your market lie. With that information, you can effectively price your offerings so that they are higher than those of your largest competitor, but not so high that you alienate consumers.
Anchor your merchandising
Let’s say you run a clothing boutique and you were recently able to acquire 50 red leather purses for $50 dollars a pop. You could employ a few different strategies to move them. You could call them a limited edition in order to instill a sense of urgency in your customers, however, since the keystone price of the item would have to be $100, scarcity may not be the best tactic. Sticker shock has a good chance of outweighing the novelty appeal, but if you put the $100 purses next to a $500 handbag, you’ll have better results due to the anchoring principle. By introducing consumers to one piece of information, you can affect how they view subsequent information. Anchoring is why Amazon lists the retail price, the Amazon price and the difference between the two for everything they sell. It’s also one of the main reasons the company made $36.75 billion this quarter.
Make subscriptions easy
If your company offers any product or service on a subscription basis, you need to make sure that your company makes that process as painless as possible. This means listing its price in terms of monthly, not annual payments, putting a focus on how convenient the service is and folding in any delivery into the subscription fee so that the words “free shipping” can appear prominently on every piece of material advertising the promotion. As this Entrepreneur article explains, removing pain points from subscription packages can greatly increase consumer satisfaction and loyalty.
This article was written by Mario McKellop for Small Business Pulse