Stop Discounting Your Prices & Increase Your Profits!
If your sales only trend upward when you discount products, it’s time to determine why.
Some customers just love to feel like they are getting a bargain and discounts can be a great way to reach those consumers. In fact, some companies have a pricing strategy in place where they purposely mark the original cost of an item very high and then discount it to the price that they really want to sell it at. This makes the consumer feel like she is getting a bargain and allows the store to get the profit margin they need.
This strategy can work really great if you are introducing a new product, but your current customers likely won’t respond well if you suddenly hiked up your prices and then “discount” them to the previous price.
So, what can you do?
1. Analyze the Competition
Are your prices fairly in line with your competitors, or do they offer the same or similar products at lower or higher prices?
It’s often not advisable to get into a “pricing war” with your competitors as this can hurt both of you by driving prices down to the bottom of the barrel where no one is making a profit. However, if your pricing is significantly different than your competitors for similar products, you should ask yourself why.
Would a change in materials or distributor save you money while allowing you to put out the same quality of product at a lower price?
Would a change in materials allow you to charge more for something that doesn’t increase your costs by much? For example, could you start using organic ingredients or materials?
Analyzing your competition can act as the kickstart you need to make changes for increased profitability.
2. Learn More About Your Customers
You likely know the basics about your customers: gender, age and basic interests, but there is so much more to them than meets the eye!
- What is the average household income for your customers?
- What interests do they have outside of what you sell?
- Are they moms/dads?
- Are their kids young or older?
- Do they tend to be single?
- What other companies do they shop at frequently?
Knowing more about your customers will help you craft marketing messages that really resonate with them. The better your marketing messages are, the more products you should be able to sell at a non-discounted price because the desire for owning the product will be strong!
3. Educate Your Customers
Your customers may not be willing to pay top dollar for your products because they don’t (yet) realize why they should. This is especially true if your competitors are able to offer the same or similar products at a lower cost.
Take some time to educate your customers about your products!
Do you use natural or organic materials whereas your competitors do not? Tell them!
Are all of your products made in the USA while your competitors outsource? Tell them!
If your initial pricing for products is higher than the competition there must be a reason why. Instead of discounting your products and taking a hit on profits, share your story with your customers. In many cases they will not only appreciate that you are sharing the “insider story” with them, they will love that you are! More importantly, they will appreciate why the cost is a bit higher and be more willing to pay the premium.
ARF Financial offers fast-approval bank loans to small businesses. If you’d like to learn more contact us today to speak with a rep!