When did you last put up your prices?

If you have read my free report – 7 things you really need to know about your business numbers – you will know that I am passionate about pricing. Too many small business owners are working far too hard and charging far too little for their product or service.

They don’t know what they do better than their competitors and price accordingly. And some are more afraid of losing a customer than they are focused on making sure each sale is profitable. So the only basis on which they think to compete is price. They think, “If I’m able to beat my competitor’s price, I’ll attract more customers and make more money.”

Well the first part is probably true. Attracting customers who buy on price is easy: just be the cheapest and make price your call to action and soon you won’t be able to move for customers – unprofitable ones. Because you are selling so cheaply you won’t be able to provide a service that stands out and you won’t make any money anyway. And as soon as someone drops their price below yours, all your new customers will move on to them.

What everyone who competes on price discovers is that the people who buy on price you don’t want as customers anyway! They won’t buy your upsells, they won’t value your time and they won’t be grateful for what you do for them. But they will cause you the most problems and take the longest to pay.

You don’t need them because there are plenty of potential customers who make purchasing decisions based on factors other than price. It helps to understand that customers are not actually buying a product or service. They are buying a solution to a problem or need. Fulfill that need at a price they can afford and you’ll have no shortage of potential buyers for your product or service. Those are the customers you want.

So ask yourself why they buy; it is usually for one of 3 reasons:

  • It is convenient: people appreciate convenience and want a hassle-free experience. Think Amazon.
  • They enjoy the experience: you provide great service, with a friendly smile and its fun. Think Disney.
  • They trust you: who’s going to spend money with someone they don’t trust to deliver the goods and keep their word. A strong guarantee can win sales on this point. Think M&S.

If there is one thing you don’t want it is customers who buy on price alone. Hopefully, I’ve convinced you to look at increasing your prices. How will your customers react? If you already provide them a good service at a fair price, most will have very little objection to a modest price increase. And did you know that on average 20% of customers will pay a premium price if one is available and they can see the extra value?

Noel Guilford, Principal at Guilford Accounting
Noel Guilford is the principal of Guilford Accounting a small business accountancy practice specialising in advising owner-managed businesses on current accounting, finance, and tax matters. You can reach him via email at noel@guilfordaccounting.co.uk or by phone at 01244 660866. He is the author of the 'Figure it out - an entrepreneurs guide to understanding your business numbers' which you can obtain by visiting guilfordaccounting.co.uk.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ His latest book, How to Build a Successful Business' will be published in 2018.

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