Small business owners often utilize what’s known as a promotional pricing strategy to introduce themselves and their services when their business is new. Think of an updated model for an appliance. The ad might have a higher price listed but for a limited time only get it for the low, low price of $99. Then, after consumers regularly purchase the new product, they gradually raise the price over time.
Similarly, business owners can introduce a new service to their clients by listing it for a price slightly lower than what you ideally want. If, based on market research, this service should list at $300, perhaps you inform everyone of an introductory price of, for instance, $215 for the first six months. This works well for established businesses who have a solid client base, as well as a well-known reputation, and stimulates demand from an existing target market of clients.
Premium pricing, on the other hand, can strategically position your product or service to the elite part of the market by literally pricing everyone else out. This works well for your platinum-level services, to introduce something never before seen or experienced by your market. You list it at the top of the range of acceptable prices in order to have clients self-select.
This strategy creates a completely new segment of the market for a completely new service or product, similar to when high-definition TVs entered the market. Television sets existed, but not this type. It required a new segment of the market to associate this product with an elite level of living by introducing a nonessential item which took the viewing experience to a higher level. First sets sold for thousands; now consumers can pay a few hundred for better quality. Contrary to promotional pricing, premium pricing comes down over time, so the rest of the market can access this new service they want because they couldn’t afford it at the higher prices. The brand gambles on expecting demand to exist by the act of appealing to a different segment.
So how does a business raise prices or introduce a new service? That would take a consultation to investigate who you expect to target, as well as what price range the market will support. If no one buys, then it’s priced too high.
Changing prices also requires delicacy so you don’t lose your clients or drive them to your competitor. Keeping your current clients and adding new ones relies on having cultivated a trusting relationship with them as well as a strong business reputation. But adding new clients at this stage makes you more selective as to who you bring on. Brand new business owners often lower their prices to get clients and take jobs simply to get the fees coming in, as well as build experience and reputation. However, after eighteen months or so, that tactic needs to shift into a more long-term pricing strategy.
Have you become busier, reducing the amount of time you can spend with each individual – but deeply desire delivering quality results to only your ideal clients? Would you rather have multiple clients at lower rates, pulling on your time and energy, or have fewer clients at a higher price point to make a bigger profit on each? Has the cost of doing business gone up for you? It might be time to reassess your current prices to see if there’s room to grow.
Let your pricing work for you and attract the most ideal clients to your door. Work smarter, not harder, as the adage goes.