Whether a new startup owner or a seasoned vet running a business, odds are you are constantly looking for ways to increase your revenue.
Doing this task usually leads to marketing tactics that will let you reach more people who want to hire you or buy your products. Said differently, most growth efforts are centered around selling more.
An aspect often neglected in the constant effort to sell more is how much you sell your products or services.
Pricing is one of the key elements that needs to be reviewed since it directly impacts how much your business grows. Essentially you have three options:
- You can keep your pricing the same to sell to the same market segment.
- You can lower your prices with hopes to reach a wider audience.
- You can raise your prices so you can increase your revenue per transaction.
The question now becomes what pricing road you should follow. To help you with this task, this article will cover some of the key questions so you can make the best decision for your business.
Turn to Your Competitors and the Market
One of the biggest fears for business owners is pricing themselves out of the market. Whether too high or too low, this is a risk that can be mitigated by doing an analysis of your direct competitors.
Doing a market analysis can be considered a laborious and expensive task, but it doesn’t have to be. So if hiring an outside agency to conduct a study is not one of your possibilities, here are 2 steps you can follow to determine where you are standing in the marketplace.
- Identify your top 3 to 5 competitors: it’s important that you don’t choose the people you are competing with at the moment and not those who are up or down market. Instead, focus on the ones your customers directly compare you to and take note of their pricing.
- Analyze their pricing and products: make a direct feature comparison with their products and determine where you are regarding them. If your product is priced lower and delivers the same or more value, increasing your price could be an option to explore.
Turn to Your Audience
After you’ve analyzed your competitors, it’s time to look at your audience. Getting to know them deeply can help you uncover opportunities you were not capitalizing on. It’s important to remember people are willing to spend if they can understand the value they are receiving from your business.
Here are two questions you need to answer from your audience.
- What other products do they buy? People tend to spend in ranges that they feel comfortable with. So figuring out what else they spend their money on can give you valuable insight.
- Are they willing to pay more? You could be leaving a significant amount of revenue on the table if you don’t have a clear answer to this question. If they are willing to pay more, then making a higher-end product with a more significant profit margin may be a viable strategy to follow.
Review Your Product
The most crucial aspect you need to determine when it comes to your product is whether or not you are giving more or less value regarding how much you are selling it for. And this needs to be followed up by how much of this value is what your customers want.
Said differently, it’s essential to know exactly which features or product characteristics are the ones your customers need in order to decide to buy from you.
- Determine your product’s key features. Run customer surveys to gauge what features are essential and which ones your customers could live without.
- Experiment with a less and a more feature-rich product. Not all customers have the exact needs. So having options, either higher or lower price, can be a great way to adjust your pricing strategy to drive additional sales.
Set Your Business Goals and Select a Pricing Strategy
Before changing your pricing, it’s critical these changes are aligned with your business goals. There are many different strategies you can implement, and they can all be successful. But not all will likely help you reach your goal. For this reason, clarity and focus on what you want to achieve are essential to keep in mind when evaluating your pricing.
- Determine your goal: Before changing your pricing, you need to determine your plan. Whether it’s to increase market share or improve your cash flow, every decision you make needs to be about this goal.
- Choose a strategy: This could be to increase pricing and add more value. It can be to lower pricing to increase sales volume or any number of variations. The key is that it needs to take you closer to your goal.
Work with an Experienced Accounting Partner
Adjusting your pricing can give you both short and long-term wins that can help drive your business forward. Understandably, it’s not an easy task, and one of the aspects that makes it so challenging is all the detailed data.
If you’re looking for an experienced partner that can help you find the right pricing strategy for your business, turn to Pasquesi Partners. All you have to do is click here to schedule a call with one of our experienced team members.