Business owners have a lot of decisions to make when it comes to daily operations. It may seem like setting prices for products or services is a major factor, and it is – but, based on Inc Magazine’s findings, not necessarily in the way many entrepreneurs think.
Lessons from the field
“I learned it’s a misconception that if you raise prices too much, you’ll have no business,” said New York’s Math 1-2-3 founder Mark Kronenberg in an interview with The New York Times. “There are many customers who shop based on quality, not lowest price.”
Kronenberg’s revelation reflects a natural inclination to back away from what business owners perceive as high prices, and it makes light that price can make or break the success of a business. As difficult as grasping a concept like pricing can be, The Times says getting one’s head around the philosophies of the matter can create a smoother process for business owners.
Headsets.com chief executive Mike Faith points out a great lesson his company learned by mistake. He explained to The Times that due to a computer malfunction, prices on the communication equipment site were temporarily set not of retail but of internal cost. The business owner braced for a boom in consumer purchases, but over the two days the low prices were displayed there was very little change. He told news source he now attributes the greatest value of his and all companies to customer service.
Raising prices without the sweat
Though there is some distance between a business owner’s ideas of price importance and consumer reality, pricing remains an integral part of the business ownership and operations. The U.S. Small Business Administration (SBA) offers advice in holding business while increasing prices. The SBA notes it can be hardest to increase prices when competition is hot and exceptionally difficult in business-to-business settings, so business owners in this scenario should take extra care to consult with niche financial services and evaluate price increases with careful attention to their business’ financial plan.
Inc Magazine gives three simple points to check when considering raising prices. The business publication assures that as long as price hikes are warranted, there should be no problem placing higher tags on previously cheaper items or services. Business owners who are concerned about losing current customers should take Inc’s final piece of advice especially well: The magazine suggests rewarding loyal clients a break by giving them special offers or money off in lieu of the changes.