What you should know about pricing

Pricing is obviously an integral part of your business planning. Many small business owners do no realize how you price your products or services will not just play a part in the amount of sales you get it will also affect everything from the way you market to the way you manage your business finances. This makes pricing critical to several different aspects of your small business. Learning everything you can about pricing will only help you make better decisions for your small business. Here is what you should know about pricing-

- What do you need to do with your pricing? It is important to keep in mind that while no one will be unhappy if you lower your prices, you may find that you encounter strong opposition if you have to raise them. The obvious reason for this is that no one likes to pay more for something but sometimes it is unavoidable. If you are going to be raising your prices you may want to issue a statement so that your customers are not caught unaware. In addition, this gives them a chance to stock up on your products before the price increases. It is important to understand that you should be strategic when instituting a price increase. You should only raise your prices enough to cover the price of your raw goods and the demand for your product. You should keep any prices within an appropriate range. If you need to you may want to consider several smaller hikes over a period of time rather then one large one.
- When you should institute a price increase? You should also be strategic as to when you put a price increase in place. The bottom line is that you want to pick a time when most of your customers won't really be noticing that your prices have gone up. You can often put a price increase in place by watching the sales numbers. When you are having slower times that may be the time to increase prices. When your product is sailing off the shelves a price increase may bring a large backlash from your customers. You should also be aware of any seasonal changes in your market. Your customers may resist buying your product if you increase prices during the holidays. If you are going to put a price increase in place you may want to do it well ahead of the holiday season.
- What are you offering your customers? You want to communicate to your customers that even with a price increase you are offering them a product that they will value. Many times companies will change the design of the package when they increase prices since this often denotes to the customers that the product has increased in value. This is especially helpful if you are receiving feedback that your original packaging has started to look dated. Unless you are able to provide your customers with a product that they see has value they will quickly pass it by and move on to a competitor. You can often use a price increase to do marketing research and stay on top of your competition.
- Can you use pricing for better inventory control? Many times small business owners will overlook the fact that they can use pricing to control their inventory. Lowering prices on certain products can help you to clear them out while raising prices on items that are selling can improve your cash flow. You need to carefully consider how you will deal with your inventory in terms of pricing in order to maximize your investment.