Determining the perfect price for your product is going to be one of the most difficult challenges you have as an entrepreneur. But even once your prices are stable and set, you’ll quickly realize that initial price points are just the beginning of a much larger equation. Depending on how you change those prices could have a large impact on your overall sales.
To ensure that you don’t lose customers due to inconsistent prices, you need to justify and consider any changes you make. In order to assist you with this process, here are some tips for dropping product prices effectively.
Determine The Right Amount
Entrepreneurs that have a physical product likely won’t be able to discount their goods from several thousand dollars to a fraction of that price. However, an artist or author who has a digital copy of their work may be more willing to bring their prices down, or even give a limited amount away, if it means that they will get more recognition for their artistic abilities. It’s very important that, no matter what the product is, it is discounted proportionately. Keep reading to find out how to determine that proportion.
Avoid Sporadic Spikes
One thing that entrepreneurs won’t want to do is continually change their prices with sporadic and drastic spikes. For example, going back and forth from $10 to $1 for a product may help you get more sales at first, but the long-run effects will result in low price expectations. In addition, sporadic spikes in price also leads to customer doubt, which makes it nearly impossible to build loyalty. The lesson to learn here might just be that less frequent price changes could have a more effective impact for overall sales.
Have A Reason
If it’s a holiday, have a sale. If you’ve hired a new employee, have a sale. If the weather is hot out, have a sale. The point is, always offer a reason for the sale that you are having. Therefore, when you put your prices back to regular levels, you’ll have an honest explanation for the customer. Otherwise, sales that occur, “just because” might develop customer resentment moving forward.
Consider The Alternative Options
We live in a world where things are continually being outdated and replaced. Whether it’s video games, technology, cars, or clothing, we are a generation where new is certainly “in.” With that in mind, it’s important that entrepreneurs do not hold onto their items, or overprice them, once the trend has died down. Take a look at smartphones, which go down drastically in price once the latest version comes out. Those prices continue to go down as newer technology is released. With your product, consider it’s lifeline and any updated versions. If they are available, you may be better off selling things quickly versus holding on and hoping for sales in the future.
Every business is different, as are the products they sell. However, there isn’t an industry out there that doesn’t have to consider price changes. But before you go and change the prices on your product, be sure to consider these tips for effective change strategies.