Updated: Mar 19, 2020
"Price is allowed to be high if quality/service follows it"
This is the age-old question of "how much should I charge" and "should I reduce, or even better, increase our price."
“How often do you check your rates against the competition and should you?”
The question I hear quite often is how “do you know” my rates aren’t correct; my answer is if you haven’t looked at them in the past six months they probably aren’t. This may sound a bit presumptuous, but it is a challenging question. There are lot of factors that go into price: cost, kpi’s, value, service, logistics, etc. if you step away from the question for a minute and think how often do those variables change? The answer is quite often; every year/six months there are subtle changes in our business plan/model. Now that doesn’t mean we need to re- hash all of our business prices every six months, it simply means this is a strategy we should keep in mind. If you take a cell phone for instance, the price of those in just the past several years has gone up over 100%, and yet we as consumers still buy them. We also want a lot for that money ,don’t we? It must have the best camera, most storage space, best video quality, etc. Just stop for a second and relate this to your business model and ask the modest question "does my price seem high?"
“Do you know how much you sell of your products or services?"
As business owners we have a lot on our plates and don’t always have the means or resources to accomplish all tasks, especially when dealing with a business problem or a "fire" as they say. Pricing strategy is just as important and must be analyzed with the pricing aspect as well. Let’s say for a minute you sell 5,000 green widgets that have a net margin of 1% (this means it cost a lot to sell these and there isn’t a lot of profit). Vice versa you sell 500 orange widgets that have a net margin of 25% which is clearly earns a better profit. Who reviews this for your company and determines the price? Usually business owners have a great thing going and don’t look back at the data. Just looking at that example, although fictitious don’t you think it would warrant a conversation?