In a world where a higher price is often associated with a better product, pricing your product lower might seem counterintuitive. After all, many business owners use higher pricing to increase their products’ perceived value, and it’s easy to assume that you won’t be able to compete without matching those inflated prices.
But charging more doesn’t always work — especially when the product doesn’t deliver. Customers will be quick to complain if a product’s price doesn’t align with its quality, and with the increasing relevance of online reviews, pricing your products correctly becomes even more important.
When people are constantly looking for the best deal and the best quality, you have to be smart about your price. And that doesn’t always mean an increase.
Lower Prices by Cutting Unnecessary Costs
Unfortunately, determining the best price for your product is harder than you’d think. It all depends on supply and demand, and demand can fluctuate due to seasonal changes, the economy, and social media trends, among other things.
To keep the price just right, you’d have to change it constantly, and that isn’t realistic. Consumers don’t want to pay $15 one week and $50 the next — such wide variations dilute the value of your product. Instead, you need to focus on cutting unnecessary costs that can drive your price up. Make sure there’s a strategy behind your pricing. Here are three tactics you can use:
- Cut back on expenses that don’t improve your product’s value. There are costs that directly contribute to the value of your product (such as materials and manufacturing), as well as those that don’t (such as extra office space, celebrity sponsorships, etc.). Ensure that any costs your business incurs will truly benefit the customer. High-quality production materials or better manufacturing processes probably justify a price increase, but the customer will ultimately benefit by receiving a better product.
- Limit your stages of distribution. As your products travel from the factory to the owner to the distributor to the retailer to the consumer, they’re marked up multiple times. A direct factory-to-owner-to-consumer process is much more cost-efficient.
- Don’t get greedy. You’ve probably heard the saying “Pigs get fed; hogs get slaughtered.” Figure out the profit margin you need to keep your business functional, and don’t charge more than the price needed to achieve that. You’re aiming to give your customers an incredible deal that they can’t wait to tell their friends about.
Get the Word Out
As long as you’re charging enough to stay in business, establishing fair prices, and offering a high-quality product, you don’t have to worry about outpricing your competitors. The key lies in keeping your costs closely linked to the value of your product. Then you just have to convince your customers that they’re still getting a high-quality product.
Here are a few ways to let potential customers know you’re the best:
1. Tell customers why your products are great. Write blog posts, website content, and articles that explain the materials, manufacturing, design, and distribution behind your products. Be completely transparent about where your costs come from. If customers can clearly see what goes into making the product they’re buying, they’ll be more likely to believe your product is superior.
2. Provide objective reviews. As the owner, your personal opinion about the quality of your product can only go so far. For an extra boost of credibility, ask reputable third parties to review your products and provide feedback.
3. Get your product certified. An objective rating agency that vouches for your product’s quality is worth its weight in gold. The International Organization for Standardization’s stamp of approval will give your company a strong reputation. You could also pursue certification that’s specific to your industry.
Even the best product can’t sell itself, but if you price your products so people think they’re getting a steal, your customers will spread the word for you. When you sell a high-quality product at an unbelievable price, it’s easy to debunk that age-old misconception that a high price equals high quality.
Chris Thornham is a co-founder of FLO Cycling, which engineers aerodynamic cycling wheels. Less than three years after launching, the company has sold 10,000 wheels to customers in 51 countries.