Cutting prices to try and drive revenue probably isn’t the best solution for small businesses, according to a recent article on Entrepreneur.com.
Contrary to popular belief, charging less rarely boosts sales. “If you’re selling a high-value product or service that your customers can’t easily source from another vendor, slashing prices will only slash your profits. And if you cut your prices too often, you’ll educate your customers to simply wait for the sales and never pay full retail,” the article says.
“If you provide an exceptional product or service, people will buy from you–even in a tough economy,” says Laura Allen, co-founder of 15secondpitch.com, a website that helps people “pitch themselves” better. “You’d be better off increasing the value that your clients get for their money. It’s much easier to add a few useful extras than it is to get by on even smaller margins.”
While price setting is never exactly cut-and-dried, there are three strategies that businesses tend to use: cost-plus, market-based and value-based. To find out more, click here.