This post is one in a series of tips designed to help small business owners better-navigate the challenges of today’s startup environment and is sponsored by Canon MAXIFY – the printer lineup crafted to help small business owners increase productivity so that they can focus on everything else that matters. For more information about the Canon MAXIFY printer lineup visit www.usa.canon.com/MAXIFY
Most small business owners don’t charge enough for their product or service. They typically undervalue what they offer customers because of fear. They want to raise their sale price so they can increase their profit. But, they are afraid that at a higher price, economics would force customers to buy less. The truth is, pricing is a lot more elastic than you think in business.
Here is how to raise your price to get the most profit:
1. Don’t sell a commodity. When customers do not differentiate between products which are available everywhere, they buy based on price. Small businesses have a difficult time building a profitable company selling these types of products. Stay away from building a company based on a commodity. Always think about how a customer will see your product as somehow different.
2. Don’t compete on price. Using price as a marketing tactic is a race to the bottom with competitors. There will always be someone that can produce the product for less or who is willing to cut their profits more. Remember, you are in business not just to sell products, but to earn money doing it.
3. Sell value. Find the pain customers have and solve that. People will always pay first for pain killers before vitamins. For example, consumers routinely pay $4 for a bottle of water at movie theaters and $10 for mixed drinks in bars when they are available at a grocery store for much less. They always pay more for for value (or perceived value). Premium brands like Apple and Harley Davidson make a lot of cash.
4. Watch competitors, but don’t obsess about them. What do they charge? Track the value your company offers, compare it to theirs and make adjustments if necessary. It is always beneficial to ask customers who they think your competitors are so you understand the comparison that is being made!
5. Bundle products or services. This can add value for customers that competitors can’t compete with. It will also help to prevent channel conflict if you do not offer exactly what other dealers do.
6. Introduce price increases to new customers. The conventional wisdom is to give higher prices to existing customers and lower prices to attract new ones. This is wrong. Current customers deserve the best pricing to maximize their lifetime value. When getting a customer in at a higher price, existing customers will stay longer knowing they are getting a lower one.
7. Add annual increases. Customers expect prices to always go up. Do it annually so you don’t disappoint them!
8. Pressure vendors for a lower price. Don’t forget to focus on the other part of the profit equation: cost. Keeping all of a company’s costs low like using the new Canon Maxify printer will help the bottom line. Even if your profit goes up as a result of a price increase, ask vendors to lower your cost based on volume, payment terms or product substitution.
Did you raise prices this year? How did you do it?
Canon will be spotlighting several small business owners on its social media channels throughout the next several months, so be sure to leave a comment and share your thoughts on this post using the hashtag #MAXIFY in order to qualify. If you are a U.S.-based small business owner (1-9 employees) and have faced a unique business challenge in your first year on the job, let us know! We’d love to hear what line of work your small business falls within and what you feel is the most important takeaway from this post. We’ll also be rewarding select small business owners with a prize pack including the Canon MAXIFY MB5320 printer as well as other essentials to help you run your business more efficiently. So don’t forget to leave a link to your website or social media pages that way we can see how well you’re marketing your business and get in touch!
