Striking a balance in how regularly prices change is key for businesses
The pricing you choose for the products or services you provide is one of the most important considerations you ever have to make as a business owner.
That’s because pricing effectively determines whether a customer decides to shop with you or not.
Your prices are also key to your profitability, and we don’t need to tell you how important that is!
In this article, we’ll establish that keeping a close eye on your pricing is more important than ever and determine how often your business should be updating its prices.
Why closely monitoring your prices is more important than ever
Whether you’re a restaurateur, healthcare boss, shopkeeper or gym owner, you’ll be significantly affected by a changing consumer market and global economic situation. No business is spared from these rapid changes.
Supply chains are becoming less stable, customers are becoming increasingly likely to shop around for better deals and political choices are destabilising assumed economic norms.
With increased levels of competition and periods of inflation, it’s no longer safe to assume that customers are loyal to you and your brand.
When considering all these factors, it’s safe to say that monitoring your prices and adapting accordingly has never been so important.
What factors influence price updates?
To determine how often you should update your prices, several considerations must be made.
Customer expectations
Customer expectation on price changes is an important factor when deciding whether to increase or decrease the pricing of your goods or services.
Take the example of a petrol station. Within this market, customers are familiar with prices changing regularly—sometimes even day-to-day.
Other businesses, such as those selling groceries, don’t enjoy this luxury and instead are subject to intense customer scrutiny when it comes to pricing.
Competition
The actions of your competitors are a hugely valuable indicator when it comes to amending your prices. Your competitor may decide to raise their prices. In this scenario, you may be able to do the same—assuming that you are offering a better service or product.
Alternatively, the competitor business may reduce its pricing in an attempt to secure more customers. If this happens, you’ll need to reduce your prices too if you want to remain competitive.
It’s always good practice to keep your staff informed of any major price changes so they can communicate with customers and update prices on the shop floor.
Necessity
With so many external factors affecting businesses just like yours these days, you may find that you need to update your prices out of necessity. During a period of high inflation, for example, you’ll need to raise your prices to maintain your profits.
The key when raising prices out of necessity is to attempt to do so gradually, avoiding alarming your customers and turning them away from your business. This is especially true for the sale of luxury items or services which customers want but don’t need.
Market share
If you’re feeling adventurous and looking to source a larger share of the market, you may decide to reduce your prices to attract new customers. You can do this every time you need to build up your customer base.
Once you’ve secured their loyalty, you can return your prices to their original level. In fact, when consumers see a price that is lower than it was in the past, they are more likely to buy now.
Stock
Another good time to update your prices is if you have too much stock or products that are about to become outdated. If you’re a headphone maker, for example, and you release a new version each year, you may need to shift stock quickly at the tail end of each year.
If you’re planning to shift a lot of stock, don’t forget to do so at a time when as few as possible of your staff are off work. You can manage this by monitoring their time off.
Best practice
When it comes to raising or lowering your prices, consider common and best practices in your specific industry. Do plenty of market research to establish norms.
For example, if it’s common for your industry to raise prices for Valentine’s Day or lower them for Christmas, follow these models.
It’s fair to say that no one rule suits all businesses when it comes to how often you should update your prices. You need to consider the above factors when making pricing decisions.