When you think growth for your print shop or apparel decoration business, what comes to your mind?
Investing in new equipment? Offering new products? Staffing up? New customer acquisition?
All are important — but neither are as important as pricing. That’s right: pricing, the most basic, mundane, economics-101 business staple, is actually powerful enough to change the course of your business.
Pricing affects everything
It’s the heart of your business. It gives every aspect of your company — from marketing to product to sales — context and intention.
It tells marketing who to market to. It informs sales how to describe value. And it forces product to innovate, using past pricing as its baseline.
Because of its far reach into every element of your business’s functionality, pricing has the highest impact on the bottom line.
It optimizes for growth — and growth is the lifeblood your company needs to stay kicking.
Increasing price, decreasing customer turnover
If the thought of increasing prices makes you nervous, you’re not alone. But the data tells us that offering more value to your customers — whether through higher quality product or better overall service — lowers the churn rate.
The churn rate is, simply put, the rate of customer turnover — how quickly your customers stop doing business with you.
The lower the churn rate, the longer your customer relationships, the better.
By increasing price, you’re able to put more into the value you’re offering. And that value doesn’t just impress customers one time. It impresses them enough to keep them coming back.
When it comes to pricing strategy, you have options
The three pillars of pricing strategy are cost-plus, competitor-based, and value-based.
Cost-plus pricing looks at all of the costs that go into selling what you sell, and adds a mark-up percentage.
Competitor-based pricing looks at the prices your competitors have established and uses those as a benchmark.
Value-based pricing looks at the customers to determine how much they think the product is worth.
Let’s break it down
Each option comes with its own list of pros and cons.
With cost-plus pricing, you know your costs will be covered. It’s simple. But on the flip side, your costs change as your business grows — and you can’t change pricing every time you incur a new cost.
Five years from now, how many new hires will you have had? How many equipment updates? How many increased supplier rates?
With cost-plus pricing, you’re all but guaranteeing your profits will take a hit over time. Yuck.
Competitor-based pricing, on the other hand, gives you a clear indication of acceptable market prices — but they weren’t established by you. They don’t take your unique business — your unique needs — into account.
Your business exists to offer your customers something new. Something with more value. How can you do that if you’re limited by the pricing of what’s already out there?
It’s all about the value
When it comes to pricing strategies, value-based pricing takes the cake.
Sure, it requires a deeper commitment to understanding your customer, to upholding quality, and to offering service — but shouldn’t those be priorities for your business, anyway?
So how do you effectively establish value-based pricing?
You get to know your customers. You identify who it is you’re really targeting, and you give your marketing, sales, and product specialists the freedom to input value that specifically appeals to them.
You get to know your product. You define every element of what you’re selling — whether it’s creative consulting, product curation, or marketing guidance — and you make sure the value offered is clearly articulated.
If you’re offering a desirable product to a marketplace that’s filled with customers who are desiring, your pricing strategy should reflect that exchange of value.
Value-based pricing doesn’t just allow you the freedom to create the best possible product, the best possible service, you can — it also allows you to turn higher profits while increasing customer satisfaction.
And that’s something your business shouldn’t ignore.