pricing strategy Archives

Your Guide to Resuscitating a Dying Product or Service

Some things are destined to fail. But not everything that seems like it’s circling the drain is doomed! That goes for all things in life, including a product or service your business is selling that feels like it’s totally flopping. So if you’re in that situation with your business, it might not necessarily be time to throw up your hands and cut your losses. With a little strategy, you might be able to turn things around. After all, you had the vision in the first place, so you can absolutely use your business smarts to figure out what went wrong, make some necessary changes, and even revive your business in the process.

Doomed to Fail?

It’s a hard thing to measure, but according to some studies just on products alone (not including services), around 30,000 new products are launched each year and around 80% of them fail. Again, that number doesn’t include services, but we can guess that certainly nowhere near every service a business offers succeeds, considering the high rate of small business failure in this country. So if you feel like your product or service is struggling, you’re certainly not alone!

And why might what you’re offering not be performing the way it should or the way you want it to be? Well, according to Harvard Business Review, it might not be because of what you’re offering, but how you put it onto the market. But that’s good news, right? It might mean that it’s not simply that people aren’t interested! It might be because:

Your business might not be able to support fast growth

Your product/service wasn’t fully ready for launch, meaning it won’t meet customer expectations

Your product/service is in a type of “limbo,” meaning it hasn’t found its base

You haven’t fully educated customers on your product/service, or you’ve confused them with your marketing

So if the problem is not necessarily that you just have a crappy product/service, it stands to reason that there are things you can try to revive it. Let’s take a look at those now.

Product/Service Resuscitation

So, as we’ve pointed out, not everything is New Coke or Blockbuster Video, and doomed to ultimate failure. Here’s a story for you: in 1957, the product we know as Bubble Wrap was created, but it wasn’t intended to revolutionize the way we pack items. It was intended to be a new mod wallpaper – yes, wallpaper! That didn’t work out, so it was then marketed as insulation for greenhouses and homes. That was better, but it wasn’t until IBM used Bubble Wrap to protect computer shipments that the product succeeded.

The moral of this fun story is that there are sometimes – often – ways to turn around a product or service that isn’t working, and just one of them is reinventing it the way Bubble Wrap did. Let’s look at that way of giving new life to your failing product/service, as well as multiple other useful ways you can try to resuscitate it.

Start with an analysis

The first step is to analyze all your metrics about the product/service launch itself. Make sure you’re using something like Google Analytics, and collecting data anywhere you can. Once you’ve analyzed your data, talk to your customers! Survey them – after all, what better way to find out why people aren’t buying than to ask them?

Only after you’ve done this can you know if you’ve actually got a viable product/service worth turning around. And if you’re thinking it’s time to let it go, remember: nothing your business offers is ever a complete failure if you learn the lessons about why it failed. Data analysis about the failure can vastly improve your customer experience with other offerings.

What’s in a name?

Did you know that the original name of Google was Backrub? Ick. You might not have misnamed your product/service so egregiously, but maybe the name you’ve given it is, well, boring. Think about the canned water called “Liquid Death” – what would grab your attention more “Water in a Can” or “Liquid Death”? I think we all know the answer to that one. Don’t want to go all clever? At least give what you’re offering a more descriptive name, like adding the phrase “cushion-grip” to a toolset.

Look elsewhere for your marketing

You don’t have to do everything the same way as your competition, or the way that you’ve always done it. Maybe you need to move your marketing into new arenas. First, make sure you analyze where your target customers are, then follow them there – to all the places where they are. This is called using omnichannel, or cross-channel, marketing, and it could make a world of difference. Consider using a combination of the following:

Magazines (print and digital)

Blogs

Newspapers

Radio

Television

Local Events

Social Media

Direct Mail

Trade Shows

Business Networking

Trade Associations

Change the packaging

According to a recent survey, 72% of consumers say that packaging design influences their purchasing decisions. Not only that, but 30% of businesses report an increase in revenue after improving product packaging. If you’ve got a failing product, you might want to talk to an expert about changing its packaging design. Also, consider adding a QR code or URL to the packaging so that your customers can easily learn more about your product.

Change the messaging

Your product/service might honestly solve a real problem, and help with a real customer pain point, but you might not be conveying that to consumers. Try talking to customers who are happy with your failing product/service, and you might find out they love it for reasons you never even thought of – and there’s your new message!

Tell a story

Similar to changing your messaging, one thing you can do to revitalize interest in your product/service is to really tell its story. Sit down and analyze your target customer, including all of their demographics, and write a new story about your product and how it will appeal to each demographic. Remember, customers might not always feel a visceral connection with a product or service, but they will feel a connection with a story of struggles and solutions similar to their own stories.

Get influencers on board

With the rise of social media marketing has come the rise of the influencer. Don’t discount what getting an influencer to promote your product/service can do. Consider this: not only do 49% of consumers depend on influencer recommendations, but 40% have also purchased something after seeing it on Twitter, YouTube, or Instagram.

Think about your pricing strategy

A lot of thought needs to go into the way you price your product or service. And it’s not simply a matter of pricing it too high and putting off customers. Pricing it too low for your target market can also be detrimental. You need to consider your customers and your niche in the market: are you offering something that’s a lower price than your competitors? Or are you offering a different kind of value, meaning your higher quality product/service should be priced accordingly?

Get feedback

Want more feedback from potential customers? Try offering freebies (or discounts) to get some easy beta testing.

Host an event

Invite people to an educational event that also features your product/service, and how it can help solve problems. Not up for planning an entire event? Try asking local non-competitive complementary businesses to join you.

Stand out from the crowd

If your market has a lot of competition, you need to set yourself apart. You need to offer uniqueness in value, innovation, product packaging, and creativity. So really think about it: what is your unique selling point?

Relaunch your product/service

Once you’ve revamped your product/service, why not celebrate by relaunching it? Launches create excitement and buzz that generates more leads than a boring old product release or announcement about a new service.

Sometimes when things aren’t going right, you just need to move on. But sometimes it’s not time to give up! If you’ve analyzed what’s going on with your product/service, and feel like it’s worth trying to turn things around, give it a try with the ideas we’ve laid out above. Resuscitating one of your products/services could end up revitalizing your whole business. And if you’ve managed to rescue a dying product/service, we want to hear your story!

Co-written by Joanna Bowling

Running a Business in the Time of Inflation? Strategies to Help Beat the Beast

Small businesses have not had it easy over the last few years. First, we had a pandemic that disrupted the way we all lived, worked, and did business – and now? Well, now we have the beast that is inflation. You’ve probably been feeling the effects of inflation for a while now, and are probably not taking a whole lot of comfort in the fact that it’s starting to level off ever so slightly. But don’t despair, there are some strategies that small businesses can employ to cope with the effects of inflation.

How Is Inflation Affecting Small Businesses?

While inflation and supply-chain issues have been a problem since the pandemic hit in 2020, inflation really began to ramp up in the spring of 2021. In fact, according to the Bureau of Labor Statistics, inflation accelerated at a higher rate between March 2021 and September 2021 than it did at any point in 2020. And, for at least five or six months straight, 2021’s inflation rates more than doubled 2020’s highest increases.

But then came 2022, telling 2021 to hold its beer. While 2021 had the largest inflation rate in the last two decades at 4.7%, 2022 has nearly doubled that with an 8.32% inflation average (as of the summer), the highest month-over-month inflation rates since 1982.

So if you’re feeling the pinch, you’re certainly not imagining things. And you’re probably caught between a bit of a rock and hard place: your customers are looking to cut back and your costs are probably skyrocketing. You’re not alone: 92% of small-business owners reported that the cost of supplies or services needed to run their business has increased since the pandemic started.

In fact, in 2022, 71% of small-business owners reported at least a 20% increase in costs for supplies and services, with 16% saying that their costs have increased by 50%! The effect of these huge increases has been pretty brutal for small businesses. Consider these stats:

60% of small businesses are concerned about the financial health of their business because of inflation
47% report their profit margins are decreasing due to inflation
37% of small-business owners are afraid inflation will hurt the health of their business
37% report customers have complained about inflated prices at their business
30% think raising their prices will deter customers from patronizing their business

Does all of this sound familiar to you? Are you one of the 1 in 3 small business owners(according to the U.S. Chamber of Commerce) who lists inflation as their top business concern? If so, what can you do about it? Let’s take a look at what small businesses are doing to combat the effects of inflation, and what specific strategies you can try to stay afloat and keep growing during these tough times.

What Are Small Businesses Doing to Deal with Inflation?

illustration of a person next to a calculator — *In order to help ease the inflation rates, business owners are hiring accountants.*

If so many small businesses like yours are feeling the burn from inflation, what steps are they taking to try and mitigate the effects? Unsurprisingly, there’s a lot of focus on reducing costs, as well as tracking expenses:

46% of small businesses are reducing the size of their inventory
44% are purchasing software to help track their businesses expenses
24% have hired an accountant to help find ways to save money
40% have reduced marketing costs
29% have moved to a cheaper workspace
42% have reduced the number of employees on their team
Only 17% of small-business owners report not changing anything to reduce costs

So have you taken some of these steps, or are you considering doing so? If you’re unsure where to begin, and what strategies are right for you, check out some tips below.

Strategies to Consider

According to James Cassel, chairman and co-founder of the investment bank Cassel Salpeter, “Most business owners have experienced minimal inflation or even pricing deflation. Today’s small businesses need to be creative in their approach to dealing with inflation, as it’s not likely to go away anytime soon.” So let’s think creatively! To deal with inflation, you can:

Streamline and automate processes

Sometimes you need to invest to grow, right? So maybe you need to spend a little money on software to automate time-intensive work. Look at all the little things that take time and manpower: could scheduling, billing or collecting payments, or taking orders be automated at your business? Or think even more creatively: if you’ve got a warehouse, for example, could investing in a new shelving system streamline how you work?

Invest in your business in other ways

You can take some of your capital and put it into streamlining and automation, but you can also use it to do things like ramp up your marketing or revisit your pricing strategy in order to attract customers. And if you don’t have the money to do so, but aren’t adverse to taking on some debt via a business loan, now is the time to do so. The Fed raised interest rates in March for the first time in 2 years (so it’s not an ideal time to borrow), but we’re scheduled to see a few more hikes this year alone.

Watch your cash flow like a hawk

Now’s the time to knuckle down and really pay attention to your cash flow, since you’re between that rock and hard place we mentioned before, where you’re facing increasing expenses while at the same time losing customers or finding them slow to pay. That means you’ve got to stay on top of the money coming in, so try things like:

Invoicing customers as quickly as possible

Requiring immediate payment

Reviewing your expenses more often, ideally weekly

Running credit checks on customers

Being vigilant about your accounts, and maintaining a policy of not selling to customers with outstanding bills

Reduce costs

Prices might be rising, but there are still things you can do to try to reduce expenses in this brave new world of crazy inflation. You can:

Talk to your merchant credit card provider about lowering your rate

Switch from landlines to VoIP

Talk to your landlord about a rent reduction deal

Negotiate with your service providers

Downsize your office by offering more remote work options

Stop printing so much!

Check to make sure you aren’t paying for any unnecessary monthly subscription services or other recurring expenses

Use a cash-back credit card

Stock up on supplies while you can

It might seem counterintuitive to tell you to go stock up after we just suggested reducing expenses wherever you can, but it could be a smart move to stock up on supplies to beat any issues with the supply chain. A lot of businesses are reorganizing their spaces (it comes back to streamlining!) and buying extra of what they need, to avoid running out, and to lock in today’s “cheaper” prices before they rise again.

Increase your prices – carefully

While this isn’t the ideal solution, it might be a necessary evil. Just make sure you’re doing it judiciously, and aren’t making giant increases across the board. Consider making smaller, incremental, less noticeable changes. You can even try offering premium, paid subscriptions or memberships, or bundled offers if that’s something you can do, to bring in a little extra cash.

Target the right customers – and be ready for new ones

If you’re looking to bring in as much money as possible in these tough times, know who you should be targeting. That means analyzing your business and determining where your most profitable sales come from. Check out what the most profitable sales have in common, and then zero in on those areas or people.

But while trying to sell more to your existing customers is probably your best bet, don’t forget that inflation could actually drive some unexpected new customers in your direction. People could very well be looking for new businesses that meet their needs in terms of prices and rates, so be ready to welcome these curious customers with open arms.

Inflation stinks – for everyone. But if you’re running a small business, there’s no need to panic. You have options to beat back the inflation beast, you just have to find the right one for you. And let us know: how are you weathering things as inflation hits us all hard?

Co-written by Joanna Bowling

Is Your Pricing Strategy Helping You Grow?

You’re confident about the product or service your business is offering, right? But how confident are you when it comes to pricing what you’re selling? Deciding how much to charge customers is about more than just calculating the cost of the resources you’re putting in, adding a markup, and hoping for the best. It should actually take quite a bit of thought on your part; after all, there’s a very delicate balance when it comes to pricing: set your prices too low, and you won’t be maximizing your profit potential; set them too high and you could end up driving away customers. So where do you even start? Well, you need an understanding of your target audience and competitors, but also an understanding of different pricing strategies, so you can decide which pricing strategy is best for your business.

What Is Pricing Strategy and Why Is It Important?

price tag with a checkmark next to it — *A good pricing strategy will help your business grow by building trust with your customers.*

As with a lot of complicated ideas, there is a simple definition behind the term “pricing strategy”: basically, it’s the method that businesses use to determine the best price for their product or service in order to maximize profits. Ok, sounds easy enough, but how do you land on that “best price?” Well, you not only need to consider consumer and market demand, but you also need to remember that however you choose to price your product will give signals to your customers about how much you value your product, brand, and the customers themselves.

In fact, the whole thing is really all about perceived “value” and tapping into the things that drive consumer behavior: according to Eric Dolansky, Associate Professor of Marketing at Brock University in Ontario, “How much the customer is willing to pay for the product has very little to do with cost and has very much to do with how much they value the product or service they’re buying.”

So, a strong pricing strategy should both build trust with your customers, as well as help you work towards your business goals. If you get it right, your pricing strategy will:

Represent value for your customers – Think about the word “cheap”: it can mean either “lower priced” or “poorly made,” right? Your pricing strategy should not simply be making your product as “cheap” as possible while still scraping by with a profit; a slightly higher price will give the impression that your product or service is of higher value, while a price that is too low can send the wrong message.

Convince people to buy – While a price that is too low can mean that your product or service will seem “cheap” in the wrong sense of the word, a price that is too high can also drive people away. Your pricing needs to be competitive, and not be more than your target audience is willing to pay.
Target the right customers and make them feel more confident in your product – Your pricing strategy should take into account whether your customers are seeking value or luxury, so you can price your product or service accordingly, and will make your customers feel that they are making the right choice.

All of this can add up to measurable changes in your revenue and growth rate: some studies have even shown that small differences in pricing can raise or lower revenue by as much as 20-50%, and pricing your products or services correctly can be up to 7.5% more powerful than customer acquisition. Pricing is indeed a big deal for growth, so it’s important to get a handle on which strategy is right for you; that means studying up on popular pricing strategies and deciding which is right for you!

Top Pricing Strategies to Consider

So we know what pricing strategy is, and why it’s important for the growth of your business, but how do you choose the strategy that is right for your business? First, look at different pricing strategies; there are multiple options you can choose from, so let’s take a look at the major ones; they all have different strengths, meaning it depends on what you’re selling, and who you’re selling to.

Value-based pricing

With this strategy, you set your prices according to what consumers think your product is worth; in order to set value-based prices, you must have a deep understanding of your target audience, as well as your brand’s own reputation, and you’ll need to take into account how the state of the market affects how people perceive value.

This is a very common, and often recommended pricing strategy, especially for businesses that lean more towards offering service as opposed to a product, like SaaS businesses, although you can see it being used in cases like a wedding dress being worth thousands dollars more than a prom dress. This strategy can boost customer loyalty and sentiment, but it does require that you really stay on top of who your customer base is, and their buying behavior.

Competitive pricing

competitor websites on a computer screen with "your website" getting in between — *Constantly tracking your competitors prices can help you create a price to beat theirs.*

This strategy basically means that you’re constantly tracking what your competitors are charging, and setting your prices in order to beat them. It can be very useful if you’re just starting out and trying to attract customers with low prices, if you’re operating in a highly saturated market and need to stand out, or if you want to build a loyal base of customers who are price-conscious. But this strategy can also be hard to sustain, especially since it requires that you have low production costs and don’t have to worry too much about your costs.

Price skimming

Businesses should be cautious about using this strategy, which dictates that you set your prices as high as possible, and then slowly lower them over time. While it can attract higher-end customers who consider themselves trendsetters, and can help you break even more quickly, this strategy can end up annoying customers who paid premium prices only to see them lowered later on, and drive them to your competitors.

Penetration pricing

Similar to competitive pricing and on the opposite end of the spectrum to price skimming, with this strategy, you’ll set your prices very low to begin with and gradually raise them – it’s almost like offering a free sample to get customers interested. The issue with this strategy is that you’ll need to make sure you build a very loyal customer base that is sure to stick around when you eventually raise your prices to start increasing your revenue.

Premium pricing

This is similar to value-based pricing, but more focused on customers who are looking for a luxury experience and are willing to pay more for something that they perceive as high-end. This strategy requires you to build brand awareness, and a reputation as selling something that is luxurious, rare, and exclusive – or even just seen as higher quality than a more generic brand (think drug store products like painkillers).

Freemium pricing

a green tag with a money symbol on it and a blue tag with a discount sign on it — *Freemium pricing is a combination of free and premium costs for your products.*

A combination of the words “free” and “premium,” this pricing model is used by businesses (especially those selling software or subscription services) that offer a basic version of their product in the hopes that they will upgrade to a higher-priced product with more features. You can use this strategy to build customer trust in your product, but you need to be careful that you don’t make the price jump to a premium version of your product unrealistic.

Cost-plus pricing

This is probably the simplest of all pricing strategies; with this model, you focus solely on the cost of your product, and add a markup in order to make a profit. For example, if you sell handbags that cost $25 to make, and you want to make $25 profit on each, you would simply price the bags at $50. This strategy really only works for physical products, and only when your competitors are using the same model, so make sure to conduct a pricing analysis (see below) to see if this model will work for you.

Dynamic pricing

You might also know this strategy as “surge pricing,” a model that allows for fluctuating prices based on demand. You’ll probably need to use an algorithm to keep up with this type of pricing, so you can take into account things like customer demand and competitor pricing in real time. This strategy doesn’t work well for subscription products, because customers will expect consistent monthly or annual payments.

Psychological pricing

Products are priced at $9.99 instead of $10 for a reason! You can use human psychology to your advantage with strategies like the “9-digit effect” (charging $99.99 instead of $100), placing a more expensive item next to the one you’re more focused on selling, putting the original price next to the sale price (“anchor pricing”), offering “BOGO” deals, or changing the font, size, or color of your pricing information. If your strength is knowing your customers’ motivations, and knowing how to appeal to those motivations, especially if these motivations are price or value-based, this strategy can be a big boost to sales.

After you’ve chosen a strategy and have begun to think more specifically about how you’re going to price your product, conduct a pricing analysis to evaluate your pricing strategy against market demand. You should do the following four things:

Calculate the true cost of your product or service by looking at all of your fixed and variable costs, and then subtracting them from what you plan to charge for your product or service.
Conduct market research, perhaps by using focus groups or surveys, in order to understand how your target customer base responds to your pricing strategy.
Examine the prices set by both your direct competitors (businesses offering the exact same product or service), and your indirect competitors (those offering alternatives to what you’re offering).
Make sure you’re following the law and being ethical, paying special attention to the ideas of price-fixing and predatory pricing.

Growth takes work! Nailing the right price for your product or service can be tough, but by thinking about what pricing strategy is right for your business, and by conducting a little analysis to make sure you’ve hit on the right one, you can boost your profits, revenue, and sales volume.