 Raising Your Rates Can *Increase*
Your Business
By
Diane Hughes
Copyright © 2004
How many times have I heard literal horror stories from Internet business
startups? Too many times to count! I get emails from those who just simply
can’t seem to make a living online. They’ve tried everything (according
to them) and are still struggling to make ends meet.
At some point, the "conversation" always turns to price. That’s where
I find a lot of online business people making their mistakes. The common
mindset among Internet business startups is that you have to keep your prices
rock-bottom low in order to attract customers.
Nothing could be further from the truth! Raising your rates (in some cases)
can actually increase your business. How so? Here are several reasons....
1. People Equate Price With Quality
I’m sure you’ve heard the expression, "You get what you pay for."
That statement comes from a long line of lessons learned by people across
the globe who have bought something at a discounted price and regretted it
later.
Maybe the product was used. Maybe it was made with inferior materials. Perhaps
a "discount" service they tried fell through and left them in a fix. It could
be any number of reasons, but those who have tried the "bargain" or "discount"
route and have been burned are quick to look for higher priced products and
services. It makes them feel safe.
I know of several online business owners who raised their rates on the services
they provide. What happened? For about one week it seemed they had made the
wrong decision. Business all but stopped! However, after that "adjustment"
period, floods of leads came rolling in. They never regretted it.
2. Customers View Higher Prices As A Status Symbol
It’s true! I’m sure you’ve met some people who love to brag
about how much they paid for everything they own. Their car was custom ordered
from the dealer and cost much more than any old car chosen from the showroom
floor. Their clothes reflect this season’s latest trends and were purchased
at full price from the expensive department store... NOT at an end-of-the-season
clearance sale. I could go on and on.
The point is, many customers simply will not buy a product or service at
a discount price regardless of how good the quality is. They have the "ability"
to afford higher prices and are proud of that fact.
3. Many Believe Expensive Products Are Image Boosters
I actually heard this conversation in a department store once.
Woman One: "Look at this blouse! Isn’t it wonderful?"
Woman Two: "It’s OK, I guess."
Woman One: "But it’s an Adrian Bloom blouse! I’m going to buy it
and make all my friends jealous."
Woman Two: "Who is Adrian Bloom?"
Woman One: "I have no idea, but this blouse costs twice as much as that Liz
Claiborne one so it must be the next big thing!"
Can you believe it? The woman had no idea who the designer was, but based
on price, she decided it would enhance her image so she bought it.
The same is true of Internet shoppers looking for products or services. Those
who believe being associated in some way with higher-priced businesses are
more willing to spend money because they feel it will enhance their images.
The psychology of pricing is a complicated subject, and I’ll be the
first to admit that raising rates will not work for everybody. Before you
raise your rates, consider the following:
1. Can you offer something better or different than your competition?
2. Will the rest of your business support the "branding" of a higher price?
(i.e., Do you have a very professional-looking site, excellent service, and
other elements that those who pay higher prices expect?)
3. Will the new pricing structure allow you to make as much, or more, money
by selling fewer items at a higher price rather than many items at a lower
price?
It just might be that the reason your business is struggling is that you’re
charging too little. Give some serious thought to raising your rates. It
just might be the best thing you ever did!
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