Pricing or target market? It can be a real chicken and the egg question.
Posted on July 10, 2013 by Talmar Anderson, One of Thousands of Business Coaches on Noomii.
What to consider when considering a price increase.
As business owners, a constant goal is growing revenues. “This year I am gonna make X.” A lot of us set that goal based on needs (operational costs plus personal needs) and then tack on a hopeful amount. “It would be great to have $2,000 more a month”. Sooooo, our goal that year would be X because Operational costs plus our personal needs plus $24,000 (our arbitrary 2K x 12) equals X. Does your head hurt yet? I know we are talking math but this is the good stuff. In our numbers is the real power of being a business owner. But that’s not my topic today…..the question of raising your pricing is the topic.
If we need more revenue we have to make some decisions on the course of our business. I am involved in a lot of pricing discussions as a result of considerations on how to create more revenue. Raising pricing certainly needs to be part of the discussion. As expertise grows and demand increases for services or products a price increase can be the answer. This can help boost that bottom line figure for December’s last report.
However, we need to consider our target market. Will you be pricing yourself out of your target market? And if that is the case, is there a new market that would be able to buy in that price range? But then does that change your business completely? Will you need to redefine your product and service offerings to step into this new market? Will you have to spend money to rebrand the company for the new market? Raising pricing is one way to create more revenue but not the only way.
Make sure that you give serious consideration to whether you will be creating a new business model by changing pricing. Change can be good but it is a real commitment of time and money when that kind of transition occurs. If we are looking for more revenue, trying to work within the business model of the current established target market is the starting point, not usually pricing.
