How To Maximize Profits With Pricing Strategy In An Economic Downtime
During an economic slowdown, business owners face distinct challenges in pricing their products and services. Today’s marketers strive to extend affordable prices to consumers who are making purchases with more apprehension and consideration, but lowering prices to attract careful customers also lowers the profit margin. Large corporations can afford to slash prices to move higher quantities, but this technique is less effective for small to mid-size businesses.
How can small business owners maximize their profits without reducing their prices? The answer lies in a “teamwork” model of pricing strategy designed to move high priced merchandise.
The primary objective for small business owners is to sell the products and services that bring in the biggest profits. Begin by emphasizing the high value of an affordable product. Entice customers with a free offer or low-priced product that will lead them to you. Sometimes a bundle of products sold together at a special price works to attract customers to visit your store. After new customers find you, introduce them to the high quality of your superior products.
We see this marketing technique employed regularly in popular grocery chains, such as Jewel and Dominicks, who advertise milk for $1.99 in hope that customers will purchase more products when they visit the store. Many software companies offer free trials of their programs, hoping satisfied users will buy the high-priced version after a 30 day trial. Often free offers or low priced deals double as powerful viral marketing campaigns because people are often excited to tell others about the good deals they find.
Many marketers make the mistake of focusing on the profit margin for each product individually. Instead, think of your collected set of merchandise as a “team” working toward the shared goal of maximizing profits for your business. The low-priced items play a support role in attracting customers and growing your client list. High-priced products yield dramatic results, but these profits are undergirded by a strong foundation of smaller sales.
As you learn to think of your inventory as a “team,” offer a range of prices from low to high to draw a variety of new buyers. Especially in these trying economic times, many customers need to build trust before purchasing your higher-priced items. Get them in the door with a well-executed marketing plan for a low-priced item or even a free giveaway. Transform these new buyers into loyal customers with superior customer service and a quality range of products from low to high-end. With the “teamwork” mindset, a few simple changes in pricing strategy can be the key to maximizing profits for your small to mid-size business.