If you’re of the mind that lowering your prices is likely to encourage members of your target audience to make more purchases in your store, we’re here to tell you something…that way of thinking actually makes sense. After all, people like to save money whenever they can, right? However, we’re also here to tell you that lowering your prices is a business strategy that may not pay off in the long run.
What are the negative implications of lowering your prices? Well, firstly, let’s consider the obvious. You decrease your profit margins. Naturally, the lower the costs of your goods, the less you profit. So, in the long run, lowering your prices may help to boost sales numbers, but not your bottom line. As well, low prices can also give off negative impressions. Giving the public the notion that your products are of low quality is a possibility when they are sold so cheap.
How can raising your prices possibly lead to an increase in sales? Well, let’s work with what we just mentioned. Higher prices connote higher value. And, believe it or not, the majority of Canadian consumers are willing to pay more to ensure that they are receiving high quality products. They live with the idea that they “can’t afford to buy cheap”. In other words, when you buy cheap, you usually have to keep re-buying, as the products tend to break easily or have short-term usefulness.
On MarketingForSuccess.com, Charlie Cook encourages business owners to highlight the value of the products they sell. By ensuring the public that your items are of high quality, you will be more successful at charging higher prices for them. Naturally, this increases your profit margins leading to better opportunities for long-term success.
“Most service professionals think that they’re already charging as much as they can, because prospects and clients often balk at their existing prices,” writes Cook, “But nine times out of ten when prospects complain about price, it’s not the total cost that’s the problem. The problem is that the price is presented out of context, so prospects don’t understand the value of your services. Without understanding the value you provide, a very reasonable price is going to seem high and become a barrier to sales.”
Cook admits that he has passed on this type of advice to business owners who have called him “nuts” for doing so. However, after taking his advice, they have enjoyed profits that have increased by as much as 50%. Megan Sullivan agrees that raising your prices can help to lead to a boost in sales although it is often assumed that it would make clients hesitant to work with your business.
On Intuit.com, Sullivan recommends that business owners raise their prices and boldly announce them to their current clients. “Give them the chance to renew their contracts or purchase products and services before the increase takes place,” she advises, “Raising prices is not something that should be taken lightly. Be sure to analyze the pros and cons of increasing your prices for both the short- and long-term.”
At Canadian POS Corporation, our many years of experience has proven to us that Canadian consumers tend to spend more when they’re able to use their credit cards to pay for their purchases. If your store provides customers with payment options that include Visa, MasterCard and Interac, you will find it a lot easier to raise prices without your customers worrying about being able to afford their purchases.
If you’re not yet accepting credit cards and debit cards, we highly recommend that you contact us to learn more about how our Countertop and Wireless POS terminals can help your business to generate more sales. Even if you’re looking to upgrade from your current provider, call Canadian POS Corporation at 1-877-748-2884 or email us at info@localhost.