The role that pricing plays in influencing the sales volumes and success of a business is often underestimated and oversimplified. Conventional common sense would suggest that lowering prices would increase the number of sales that a business is getting so for business people who subscribe to this simplistic approach, the only factors that influence how they charge are their running costs and desired profit margins. While positioning your business as the more affordable alternative to its competitors is a very valid pricing strategy, most of the time business people—particularly inexperienced ones—who pursue lower prices do so simply because they subscribe to the aforementioned notion that this will bring in more business. The truth is that higher prices do not always necessarily mean fewer customers or reduced sales for your business.
While various psychological mechanisms cause people to at times to prefer higher prices to lower ones, such as those described by Robert Cialdini in his book Influence: Science and practice, it is still possible for an ordinary business with unremarkable goods/services to raise prices and enjoy reasonable profit margins without having to rely on undercutting its competition. Let us discuss how businesses can eliminate all the implicit cues that they may be giving off which cause customers to resist higher prices and always expect low prices.
Register your company
Running an unregistered business is perfectly legal in Zimbabwe, though you may fail to enjoy many of the benefits that come with registration. The problem is that operating a business in this manner causes potential customers to automatically expect lower prices from you. Whatever price you state, many of your customers will expect it to be lower than your registered competition’s. So when your business is unregistered, a lot of the people who come knocking on your doors will be bargain hunters. Conversely, this also means that serious people with more generous budgets will steer clear of you. Even worse you may be regularly forced into impromptu price negotiations. On the other hand, when dealing with registered businesses, customers are more likely to find the steeper of their prices to be more palatable. In short, registered businesses command all the respect, get higher-quality customers and can charge more.
Get an office
Working from home was gaining popularity long before the pandemic but having an office or at the very least, a business sounding mailing address will allow you to, among other things, charge more. Many people out there still take the lack of an office as an indicator that you are an informal operation with lower overheads and they will expect those savings to be passed onto them in the form of lower prices. So in reality not having an office, or even using an address that sounds too residential, may send an undesirable message to potential customers.
Mind the look of your premises
Once upon a time I was a very big fan of functionality and disliked the idea of wasting money simply to make something that is already working well appear more appealing to the eye. I will save the story of how I repented for another day but there are still many businesses out there that do not see the value of making their premises more pleasing to the eye. While making your working space look better may at times feel like a wasteful extravagance, this can benefit your business greatly particularly when your customers regularly see where you are working from. A well laid out office or even freshly painted machinery and equipment on the manufacturing floor signal that a lot has been invested in the business, so customers expect and are willing to pay more. An untidy office with the ceiling buckling in because of water damage on the other hand screams “low price” which results in every person who walks in through your doors expecting a bargain.
Your packaging and branding
Small Zimbabwean food manufacturers and packagers appear to have a problem. This problem is caused by the fact that there are only a few local companies which manufacture packaging material. This means that for most of our smaller manufacturers and packagers there are only a few types of containers from which they can choose. Most of these containers are mass-produced and are usually easily available to any business or individual who wishes to package their product. This has created some unforeseen challenges for those businesses which need to market their products as unique or special. For example, the same bottle is used by more than a dozen big manufacturers (and countless smaller ones) as a container for anything ranging from peanut butter to marmalade. With this kind of uniformity in packaging, customers are less likely to appreciate the uniqueness of your product and are unlikely to consider a product which is more expensive than its similarly packaged counterparts to be anything other than a blatant rip-off.
The above is only a single example of how packaging can influence price perception in the minds of customers. The quality of your branding and packaging also plays a significant role in how customers perceive the quality of the contents. If customers consider your packaging to be of low quality it follows that they will develop a low opinion of the contents and will end up expecting lower prices.
To get away with charging higher prices than your competition, you need to help your customers convince themselves that your products or services are worth your asking price. It is difficult but not impossible; there are numerous companies out there which thrive from selling overpriced drinking water.
A landline telephone number can also lend your business much-needed credibility. This will hopefully show that your business is established and not a fly-by-night operation. Corporate email addresses for your employees and yourself will also serve you well towards developing “business-esteem” and consequently the ability to confidently demand more for your products and services.