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Deciding to raise or lower your prices

womanthinking19103605.jpgEvery business struggles with the decision to raise or lower prices. When an item is no longer selling, lowering your prices may be the only way to clear it out of your inventory. Raising prices will happen often as you need to compensate for the increase in prices of your supplies. Small businesses that are in the food industry often have to raise their prices because things like cheese will rise and the only way they can afford to keep buying it is to raise their prices. You may be able to ease some of your customers woes about the price increase by telling them about the increase in vendor prices and a few of them may be okay with paying more for the same product. Now, how can you make the decision to raise or lower your prices? Here are some easy steps for you to follow:

How much do you want to raise or lower your prices?
While no one is going to complain about things when you lower your prices, you will have some backlash when you raise your prices. If you know you need to raise your prices, try making a big announcement so your customers aren't caught off guard. This will give some of them an opportunity to stock up on some products before the price goes up.

You should only raise prices up enough to provide for the demand of your product and raw goods. Keep the price hike manageable. When you raise your prices too much, you are going to get a lot of backlash and lose a lot of customers. If you are concerned about one large price hike, you can start with a series of smaller hikes each quarter until you eventually reach your ideal price. Small hikes are often unnoticed and most customers will easily adjust to it compared to a large price hike.

When should you implement the price increase?

Timing the price increase is going to be a big part of successfully implementing new prices. You want to pick a time when your customers will not notice it. Choosing the time of least resistance is the best way to increase prices. Watch your sales numbers over the past few years so you can find out when your customers are buying and increase prices when they aren't. Watch seasonal changes too as a lot of customers will resist price increases when they come close to holidays and other times, like when their tax bill is due. Raise prices in the fall instead of in winter in order to gain the same amount of sales for a larger profit.

Give them value
One thing you may do when you are increasing prices is to change the design of the package. Changing things often implies a new value to the product and your customers will justify the price increase because you have increased the value of the product. The packaging is where the customer is going to become initially attracted to your product and if your packaging is starting to look dated, they will pass right over it and move onto your competitors. Use the price increase as a way to continue doing market research to keep your company one step ahead of the game.

Another way to add perceived value to your product is to look at the way you advertise it on the label. If you are advertising it based on the quantity inside, look for a new way to say you get more for what you pay for. For example, what sounds bigger to you, 13 ounces or 1 pound? When you are shopping, you are most likely going to look for the bigger number, even if you really are getting less.

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