To get a perspective on small business pricing, let’s first take imaginary strolls through the aisles of two retailers: Walmart and Saks Fifth Avenue. Both are leaders in their markets, so this isn’t a criticism of either one. We’re taking this stroll to observe human behavior and psychology.
If we walk through Walmart at almost any time of day, we’ll see a lot of people shopping, but if we hang out long enough and are observant enough, we’re going to notice a few abandoned shopping carts as well as some clothing that has been picked up as if to buy, but set aside randomly throughout the store.
The folks at Walmart do a pretty good job picking up these discards, but they happen.
If we do a similar stroll through Saks, we’ll find that they don’t have shopping carts, but that’s not really the point. What we’re looking for is clothing that has been picked up with the intention of buying it, but the customer changed her mind. Did you find any abandoned purchases in Saks? Me neither.
The point I want to make is that psychologically, it’s much more difficult for people to abandon a high-value item after they have taken the initial steps to buy it. Smaller purchases are more inconsequential; we really don’t have a problem of saying “never mind” and moving on. Inexpensive items don’t have the same connection to our hearts and minds as do the more pricey items.
This is important to understand when you set your small business pricing. Bigger items deliver bigger value and it’s difficult to turn our backs on adding significant value to our lives, both personally and professionally.
Related Article: A Tale of Two Pricing Strategies
I bring this up because I think some small business owners undervalue their products and services. I see this all the time in small business pricing. In a recent article on how to reduce stress in your small business, I suggested decreasing your workload by increasing your prices or order size. However, I understand if some small business owners are reluctant to ask for more money.
There are a various ways to increase pricing in your small business. First, you can just start increasing prices across the board. Don’t be afraid to do it. I know a couple who once owned a small inn. The husband was always reluctant to boost prices. The wife wasn’t…and she usually won the arguments. The husband soon became a believer, however, because they never lost business with a price increase.
Another way to hike your small business pricing is by providing more value. If you’re in a service industry, bundle together services and create higher priced options for your clients.
Once you have significantly increased your average order size, I think you’ll find that it becomes easier for you to close sales. Fewer customers or clients will string you along and then balk at the last moment. So not only will your revenue increase, you’ll spend less time pestering your prospects.
What do you think? Let me know how you have adjusted your pricing to get the best overall results.