Worried about raising your prices?
There is a temptation to appear affordable to all. But ask yourself, are you a charity or an entrepreneur? Tight margins are fine if you can get economies of scales or sell mass market.
However, if you are focused on suppling quality, you will have to price to position yourself in such a way to appeal to the section of the market more willing to buy from you. And that way protect your businesses profitability.
Psychology of pricing
Have you ever looked at the price of something and assumed it was bad quality because it was too low? We do it all the time. We have, from experience built up an idea around value.
If you appreciate the cost of making an item of clothing, a piece of furniture etc you will understand that staff need to be fairly paid, buildings and equipment paid for, quality of source materials from ethical sources etc.
Yes, there are consumer who have no appreciation for this, but that is an educational piece you can do as part of your marketing. But ask yourself, if you have spent years training and acquiring skills to make or create something to sell, why are you undervaluing it?
I did an article on pricing strategies focused on the fashion sector a few years ago, but the same principles apply to any sector:
In this blog I want to focus on a tactic to bring customers with you when increasing prices or re-positioning.
The club approach
You may have built up some loyal customers, fantastic. But I hear it all the time from clients, they are scared to lose them as they don't like the idea of having no sales for a few months while they re-position. I see this a lot with hobby businesses that are starting to scale.
They didn't start off commercially and produce an item that is worth far more. So, as they start to re-position they get older customers give them a guilt trip. Personally, these customer have no interest in your wellbeing. They know they are getting a bargain. However, you have to raise above this.
So one way is to simply email existing customers with a discount code (there are ways to limit these to postal addresses to stop abuse). The code can last for up to 12 months as membership to your new 'loyalty club'. Or simply say you want to reward them for their custom. However you package it, you want to group those customers separately.
You may find after 12 month, they see other people buying and realise they still want to support at the new pricing. Or, you can offer less frequent offers or reduce the discount code.
Think of it as a polite way to give notice to customers who will not support you as you become a commercial enterprise.
Very common practice, for new customers to offer 10% off their first order if they sign up for a mailing list. By doing this you can start to target a new group and build a fresh mailing list (make sure it is GDPR compliant).
When pivoting to a new customer group do your research. Scan the environment to see what they are prepared to pay for a similar offering. You can do a little bit of price competing but make sure your margins put you in a situation whereby you can pay yourself and build a sustainable business (having reserves).
You can also look at value added services you can tag onto your offering, e.g. free repairs.
I am conscious I appear to be coming from an e-commence bias, the same holds true for in-person services and bricks and mortars. You can use loyalty cards (simple print outs on card from your office printer) or just note the people you will offer a special price to while you build up the new customer base.
You may have no intensions of every expanding or going for investment, but it is important to create an enterprise that affords you the luxury of some time off, pay your bills, put a roof over your head and enjoy the fruits of your labour.