New business ventures can often be tempted to break into a market by offering the lowest priced goods and services. Unfortunately, this strategy can have disastrous effects because, if you ignore the operating expenses that your business must incur to stay afloat, you may generate insufficient cash to continue operations. This is where accounting software like MYOB, and attending MYOB courses can give you an analytical advantage by providing the information you need to establish the correct pricing strategy.
Even mature businesses may be tempted to lower prices in the face of stiff competition from a new competitor.
A cashed up large operation can easily outlast a smaller competitor even when that competitor has been in the market for a long time. This is because they have sufficient cash reserves to outlast most small competitors. It is likely that their accountants or advisers have performed strategic financial analyses which equip them with pricing strategies to get them to first place in the market.
But there are many other aspects to a sale that can encourage customer loyalty even in the face of higher prices. Let’s take a look at three strategies that small businesses can consider.
- Analyse your customers. Your customer profile is important especially in markets where service may be more important than price. Take professional services like accounting for example. As a business owner would you want to go to an accountant simply because they offer the lowest prices? It is more likely that you will be attracted to an accountant who promises you tips on how to maximise your tax return or how to manage your cash flow and minimise your business expenses. Similarly, you may be able to offer your customers an add-on service that is more important than price. One of the practical aspects of attending regular MYOB courses is that you get this information served up on a platter.
- How much can you charge? In any market there is a ceiling price and this should always be your target. When you think about it, you should always be charging as much as you possibly can so that you can keep your profits at a maximum. For example, a corner store may be able to compete with a larger competitor simply by operating at times when competitors are shut. When customers have no other choices, they will be prepared to pay a higher price simply for the convenience. In the same way there may be something you can do that allows you to offer a service that no of your competitors offers. This will enable you to put a premium price on your product or service.
- How exclusive are you? In markets where you can establish yourself as different from the rest of the market, you have less elastic pricing structures to constrain new which means you can charge more for every sale.
As a business owner, using a sophisticated accounting software package like MYOB can give you greater access to information to assist you in determining the maximum price you can charge for any item or service.
There is no need to enter the marketplace and expect to dominate it simply by offering the lowest prices. You need a much more sophisticated analysis and that is where attending MYOB training courses can really assist you.
Learn MYOB with PrecisionPays and ensure you and your staff know how to use MYOB best by having an MYOB Certified Consultant provide training – in our classroom or your office. For more information, visit MYOB Courses [http://www.precisionpays.com.au].