Yes. The answer is always yes.
However you look at it, pricing is an important part of business. Not only does it directly impact your profitability; it also says a lot about your brand. You can use it as a competitive edge in the market if you understand how it works.
An improvement of 1% in your pricing can yield as much as 11% more in your operating profits. This is according to a study published in 1992 in Harvard Business Review. If you have the right prices, you can attract the right customers, and ultimately, your business will flourish.
Pricing does not only determine your cash. It is the package you send to customers, proclaiming the value of your business.
But what is a good price in the first place?
If you think that a low price is a good price, you’re gravely mistaken. Some of the big brands can, without a doubt, afford to price their items too low, but you — a budding entrepreneur —can’t live off of the cheap profit. In order for low pricing to work, it has to be coupled with an excellent marketing strategy. Otherwise, it’s just a lost cause.
Think of it this way. The small bakery that just opened last week in your neighborhood will turn curious heads because of its cheap prices. But after a busy month or two, it will see less traffic. People will still return to the big branded bakery that they have grown accustomed to, even if its prices are a little higher compared to the new bakery’s cheap prices. Of course, this is only one ending to the story. If the bakery has better selling points than just pricing, it will definitely have a shot.
The point is that pricing is less simple than you would suppose. It entails research and understanding. It involves consumer psychology. Pricing does not only determine your cash. It is the package you send to customers, proclaiming the value of your business. It’s so crucial that you can’t afford to mess it up. As Katharine Paine, a professional in the business field, said, The moment you make a mistake in pricing, you’re eating into your reputation or your profits.
Learn the best pricing strategy for your business in our next post. (PA)