Do you dare lower your prices in this economy?
Inc. Magazine this month has a good story on this subject. Writer Ryan McCarthy profiles three business owners and their price-adjusting dilemmas.
Bottom line: Sometimes you have to give something up to get more. But you're better to create value for customers without chopping prices, since lower prices can create problems later.
For instance, online retailer PearlParadise.com began noticing sales falling off last fall. Eager to save the Christmas season, founder Jeremy Shepherd created a "luxury for less" campaign and cut prices in half on Tahitian pearls. Result: December volume were up 16%, with the less-expensive pearls accounting for 40% of revenue.
GotVMail, a Needham, Mass.-based company that offers virtual phone systems, offers a $9.95/ month service that doesn't leave much room for price-cutting. So it improved its plans, by increasing the number of minutes offered per plan and including some services free that the company used to charge for. The changes cut GotVMail's margins by 10% but offered customers an average savings of 40%. Result: Signups rose 40% in November.
McCarthy’s conclusion: “Bundling more services for the same price can be an effective way to be more competitive without cutting deeply into profits.”
Read the full story here.