Lowering Prices
Think Twice Before Lowering Your Prices
WHEN BUSINESS IS SLUGGISH, and particularly in recessionary times, many sellers lower their prices in hopes of selling more products or services.
Before you do this, stop and consider that a lowering of prices by 20 percent will mean that you have to bring in more than a 20 percent increase in sales just to offset your loss of revenue. It’s tough to increase sales by 20 percent in a good year; in recessionary times, it’s likely to be impossible. Perhaps a better strategy is to keep your prices the same, but introduce new and less expensive variations of your stand-by products and services.
For example, I learned during one recession that, while fewer people purchased my books, more of them purchased my inexpensive line of special reports. And they often spent more on several reports than they would have spent on a book, indicating that lack of dollars was not the issue here. In recessionary times, people simply become more careful about how they spend the dollars they have. Perhaps buyers perceive special reports to be worth more to them when money is tight because they zero in on specific topics of interest to them at the moment.
Pricing Psychology
AN EVEN BETTER SOLUTION to lowering prices is to increase them–even double them. I’ve been giving this advice to product sellers for years, and many have told me how well it works. I’ve found it works even when done accidentally. In one of my monthly magazine columns, I once offered one of my self-published books at $11.45 ppd., but due to a typographical error the price appeared as $22.45. Nevertheless, I received almost as many mail orders for the book as I’d received when it had been offered earlier at the correct price (and had to send a lot of refund checks as a result). Clearly a certain percentage of my column’s readers felt this book was worth twice what I was then charging for it, proving once again that you can double your present prices and still find a market willing to pay for what you offer. Think about it.
IT’S TRUE THAT by doubling your prices you may lose some customers, but your higher price will automatically attract a totally new audience of buyers. Once there was a woman who started a teddy bear repair service. When she eventually decided to do something else, she thought she had an excellent strategy for killing her bear business: she would simply double her prices to discourage customers. To her amazement, business increased. As one customer explained, “I was reluctant to bring my antique teddy to you before because your prices seemed suspiciously low. Now I’m confident you can be trusted to do the job.”
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