Is a lower price the best option
to increase sales?
There are two trains of thought as to when a price should be lowered. One is to try to increase demand and the other is to beat out the competition. Both have their own dynamics. However, keep in mind there is a very fine line between lowering a price too much and not enough on a highly competitive brand or item. For instance, if you do not cut the price enough, there could be no change in demand and your profits will decrease. For this strategy to work, you need to test various prices to see what the response is from your customers. On a fundamental level, price is how your clients value your product or service. Customers are willing to pay more for something they really want or when the product is of a certain quality. By changing the price, you may affect the perceived worth of your product or service, leaving your customers to wonder whether the quality or the service is inferior. I recommend an assorted product selection and varied price range. This strategy can help appeal to a wider customer base.
The majority of consumers want brands, designs, selection, good service, and most of all, expertise. A retailer knows what their client base is willing to pay for a piece of jewellery or a watch by studying the sales numbers. They see what’s selling and what’s not, and know what the average sale is in specific categories. Tracking the pricing strategies that work for you is critical, as is testing them. Keeping an eye on the products your competitors carry is also vital to ensuring that where there is overlap, your store comes out on top.
I’ll leave you with a final thought, which happens to be Steve Jobs’ pricing strategy:
1) Offer a small number of products.
2) Focus on high-end products and consumers.
3) Give priority to profits over market share.
4) Create a halo effect that makes people starve for new products.
I think we can learn a lot from Steve. Take what he shares to heart. The whole mechanism of buying and selling provides the operating cash you need to pay for inventory, cover your costs, and if you are doing things right most of the time, will give you what every retailer strives for: profit.
Barbara Crowhurst is a leading retail business coach and CEO of Retail Makeover. She is also a writer, international speaker, trainer, and retail store designer. Crowhurst’s comprehensive and detailed approach to retail comes from years of experience. Her career has taken her from working with some of the largest corporate retail stores in North America to consulting with thousands of independent retail specialty stores. Crowhurst can be reached via e-mail at retailmakeoverca@gmail.com or www.retailmakeover.ca.
