Putting value before price
Don't fall into the trap of lowering your prices to drive new business. Grant Cardone, sales expert and paid contributor for Wells Fargo, makes a case for maintaining your prices to grow your small business.
Price is a vital part of business success, but as a small business owner, it's a tricky line to walk. Set your prices too high and many people won't be able to afford to buy. Set them too low and many people may question the quality of your service or product, and refrain from buying. Either way you could damage your business.
Learn how to lead with the value of your product or service in order to hold your price and create a profitable future for your small business.
Focus on what your customers value
Prospective buyers may say that a purchasing decision is based on price, but in many cases, it's not. If price were truly their top concern, they would forgo making any purchases and save their money. But usually they need to make a purchase to solve a problem and this creates your opening to emphasize the value of your product or service. Understanding what people value is the first step to meeting your customers' needs better than anyone else.
For example, the owner of a construction supply business may notice that competitors aren't catering to contractors who are certified in Leadership in Energy & Environmental Design (LEED). If the construction supplier starts offering more environmentally friendly products, educating employees on the topic, and marketing its expertise, LEED-certified contractors may see the business as offering more value than competitors – even if its prices are higher.
Avoid slashing prices in times of uncertainty
During times of uncertainty, customers are going to make fewer purchases because some are unable to buy and those who are qualified to buy are more selective. If you decide to lower your prices to attract buyers – but then end up selling fewer products – you may find yourself in a precarious situation.
When those who are qualified to buy tighten their belts, they tend to compare the value of products across different categories. For example, a customer may be choosing between a home improvement and a vacation. The customer will choose the item that has the most perceived value – and that has nothing to do with the price.
Give employees the tools to build value
It's critical that your employees justify your prices by building value. You can train employees on how to compel customers to exchange their money for your solution:
Show them how to identify the problem a buyer needs to solve
Educate them on how to demonstrate your product's exceptional value
The benefit of higher prices
Obviously, on the face of it, most customers would prefer lower prices. However, there may be an upside to having higher prices. Here's why:
Businesses that have higher prices can afford the resources to provide better service to their customers.
Employees can earn better salaries and begin a cycle where happy employees have adequate resources to serve customers.
The fact is you need healthy profit margins to stay in business. Higher prices allow for higher margins, which are good for your business, your employees, and possibly even your customers. Of course, there may be times when you need to lower your price in order to boost unit sales or to win a new contract. But overall, your focus should be on building value instead of lowering your prices. The viability of your business depends on it.