Having the confidence to charge reasonable rate and not the going rate
In times of economic uncertainty, say for instance during a global COVID-19 pandemic, business confidence can
become unsettled. It can be difficult to maintain confidence in your pricing structure when you are not certain how the market will respond and the broader economy is facing challenges.
But, it is extremely important to charge an informed and reasonable rate for your goods, services and offerings. Not just the going rate, or even be drawn into a discounted ‘deal’.
There are several factors to be considered here:
Perception of quality
When it comes to pricing, perception is paramount. Most consumers love value for money, or a ‘good deal’. But this doesn’t necessarily mean they are interested in something cheap. For example, if your products are considerably cheaper than your key competitors, customers might question the quality of your items, and just how good they can really be. The opposite is often true of overly inflated prices.
On the other hand - when warranted - a premium or luxury price tag can make a certain item or experience even more appealing to some buyers.
Undercutting the market
A healthy amount of business competition can be a good thing. And of course, it is important to research your competitors and assess their pricing strategies.
It can be tempting to reduce your prices in order to attract new customers or to stand out from those competitors. But it’s important to remember that there’s usually someone out there willing to go lower, and you don’t want to end up in a race for the bottom.
Price is only one factor of the customer experience. You can stand out for other reasons too, personal relationships and quality are important factors in many sales today.
A reduction in price always comes at a sacrifice. We’ve put a blog together on the importance of understanding your break-even point and margins, you can view it here. Put simply, chronic under-pricing will mean your business will not have the required income generation to grow. Or worst-case, the cash flow to even continue.
Price-related word-of-mouth can work both for, and against you. If you’re struggling to determine the pricing of your products, particularly if they are in a niche category or they are handmade, reach out to an industry expert who can work through your figures.
At Hub we work with businesses of all sizes, and we help them achieve their financial goals. Give us a call on (02) 4926 8000 if you’d like to make a meeting.