With all the hubbub involved in running a successful business, pricing management is often pushed aside with barely the slightest consideration. The truth is, however, that good pricing management can virtually boost a business’ profit margins overnight. Since small businesses typically operate on a tight cash flow and even tighter profit margins, pricing management is an invaluable tool that can help business owners in their quest to maximize operations and performance.
Addressing your pricing strategy in a systematic fashion, brings several benefits to your business:
1. Good price management can stop revenue and margin leaks. Through effective price management you will stay in touch with the amount that customers are willing to pay for the products and services you offer and thereby reduce the risk of revenue loss through underpricing or overpricing.
2.You will stay in touch with the needs of your customers. Since pricing is heavily connected to consumer demand, you will need to be aware of the current consumer and industry trends. This information is invaluable to running a small business where success is often determined by the ability to establish a niche market and quickly cater to changes in consumer demand.
3. Learn the value of your products and services. The value of your products goes way beyond the raw materials and labor that was used to create them. Convenience, customer service, free or immediate shipping, location, and brand name, all add to the value of your products and will effect how much a customer is willing to pay for them.
4. Recognize the strength of your brand name. A small business’ reputation among customers is an asset that is often overlooked, yet can greatly add to the value of a product.
5. Encourage consistent and quality performance from your salespeople. You can establish price guidelines for salespeople that contain a target price, price floor and price ceiling, and then only allow deals that fall within this range. You can also create an incentive program that rewards high profit margins over sheer sales volume.