By Maria Valdez Haubrich
With the economy still uncertain and fears of a double-dip recession rearing their heads, many small business owners may be rethinking their prices. Is it time to cut your prices even more or offer additional deals and discounts? Or can your business not bear any further price-slashing?
Making the pricing decision can be especially hard for service businesses, where your costs aren’t so cut-and-dried. But surprisingly, even in a tough economy pricing your services higher might actually help boost your business.
Here’s how it works. For example, suppose you are an event planner putting together a price quote for an event for a potential business client. Knowing that your prospect is watching their company’s event budget, you might feel like you have to offer them a “bare-bones” event at a bare-bones price. Or maybe you feel confident enough to offer them a mid-range event at a moderate price. But are you too intimidated to even suggest a high-end event, with a price to match? Don’t be. Offering three different price points is a great sales tactic.
The reason why offering three price points works is psychological. If you only offer two proposals—for a low-cost and a moderately-priced service—the moderate price, by default, seems “high” in comparison, and a prospect who’s trying to save money will always choose the lower price.
Instead of the self-defeating two-level pricing option, throw a third, high-priced alternative into the mix. Suddenly, the mid-priced option offers a way for the prospect to save money, but also save face because they won’t look like they’re trying to be cheap. That means they’re more likely to choose the mid-range option, which will give you consistently higher sales. And you know what? You’ll also get some clients who go for the high-priced option–even in a recession.
Help things along even more by giving your different options names reflecting the three tiers, like the Bronze, Silver and Gold package, or the Basic, Upgraded and Premium package. Names have psychological effects that help persuade clients to buy the more expensive options.
Image by Flickr user Robert Couse-Baker (Creative Commons)
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