If you are like most small business owners you are not charging enough. A sluggish economy has trained customers to shop for lower prices and ask for discounts. And many small business owners are choosing to comply to make the sale.
But there is a better way.
For example, consider the decision made by 37 Signals to charge $9.99 for their iPad application “Draft” in an industry where the average price is $0.99. Setting their price at 10 x the industry standard was calculated to manage the demand, and provide excellent customer service to clients who appreciated the product.
Explaining his decision, Fried says: “Instead of going for the land grab, we created an small Island. …. The people who buy Draft know exactly why it is valuable to them, and they think $9.99 is a fair price.”
As Fried and his team discovered, lowering your price to make a sale impacts your bottom line in several ways.
- There is the lost margin on the sale
- Discount customers often expect the same level of service as full price clients. The result, you sell more, and have to increase staff to meet service demands
The perception of low value is hard to overcome.. This is a more in your head then in your clients. Once you lower your price, it is harder to convince yourself you are worth more. Take a lesson from 37 signals, instead of lowering your price to close every sale, raise it and deliver more value to the people who choose to do business with you!