5 signs it’s time to adjust your pricing strategy
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Knowing when to adjust your pricing structure can be crucial as your business grows. Set it too low and you may be selling out, but your profits won’t grow. Too high, and you could play into the hands of your competitors. These are five helpful signs that suggest that it may be time to review your pricing strategy.
As a business grows, there are often new costs that can slip under the radar and erode your profits. Have you added employees, moved to a bigger office or upgraded IT systems? These are all things you should factor into your bottom line – along with any other associated costs such as accounting, maintenance or subscription fees.
If your business is strongly service-oriented, it’s easy to fall into the trap of charging the same amount while spending overtime on each customer. You may need to start charging separately for extended after-sales support, for example, to ensure it doesn’t become a financial drain.
If you’re selling goods, make sure that any changes you’ve made to your production line isn’t making you less efficient. For example, you may have made small changes to upgrade the quality of your product, but haven’t adjusted your price to take into account additional labour or supplier costs.
If your competitors are reeling in profits selling an inferior product or service, think about how you can make your customers see the real value you offer. It may mean you have to adjust your marketing strategy to better communicate your unique selling point. Whatever you choose to do, the key is do your best to make the customer feel like your product or service is offering better value than your competitors.
Having more orders than you can handle might be a sign of a healthy business, but if you find yourself outnumbered, it may be hard to stick to your timelines. This could hurt your ability to attract new business.
The first few interactions can make or break a customer relationship. That’s why it’s important from the very beginning to make sure you paint a realistic picture of your business and know what you can deliver in a realistic time frame.
If the only way to close a sale is to offer a discount, then you should probably take a good look at your pricing strategy. You could try to renegotiate prices with vendors to help bring down the cost, look at your production costs, or reassess your product mix and marketing.
Of course, there are times when price cuts are inevitable, but it should never become the status quo.
To maintain growth and stay competitive, every business should revisit its pricing strategy a couple of times a year. This can help ensure you continue to offer a great product or service at a healthy profit and a price customers are happy to pay.
This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business.