The engine of the economy has slowed and you need to increase sales to keep cash flow moving. We get it. You must turn a profit to stay in business. That’s why some small business owners, hoping to jump-start sales, have slashed prices.
This short-term solution has a long-term downside: eye-popping prices will bring more customers in the door, but those same prices set dangerous expectations. When sale signs come down and the prices go back up, customers hooked by the initial deal disappear.
The discounter’s dilemma
People don’t see discounts as discounts – they see sale prices as the product’s true market value, the amount they should be expected to pay at any time. When prices return to their original level, people shut their wallets until the next sale. That traps entrepreneurs in a cycle of ever-thinning margins until they can no longer afford to remain in business.
I’ve seen businesses get sucked into this whirlpool time and time again. A cleaning-service startup charged north of $85 for a house cleaning, but in a bid for fast growth, it dropped its price to $19. Thousands jumped at the introductory offer, but – surprise – didn’t return for the restored $85 edition.
Value is in the eye of the beholder. If you lower your prices, you signal to customers that your product isn’t worth what it used to be. Don’t fall into price-cutting peril. Follow these steps to keep your margins manageable and customers paying what you’re worth.
- Build trust before you bust
The verdict is in, and has been for some time: trust leads to sales. With 83% of customers recommending trusted brands to others and 82% frequenting brands they trust, entrepreneurs must vigilantly build trust with their current crop of customers.
Fortunately, entrepreneurs have plenty of opportunities to do just that. Becoming a thought leader builds trust and positions the brand as an authority in its space. Top of mind awareness through traditional media helps people recognize and trust your brand over time. Traditional media also increases conversion on new digital media.
- Retarget top shoppers
Retargeting allows entrepreneurs to reach into the past and bring former, or existing, customers back to the cash register. Considering that 70 percent of site visitors are more likely to convert after viewing a retargeted ad, the retargeting mantra bears repeating.
Retargeting tags customers that have been to your website or liked your social media and follows them with advertising around the world wide web. It’s a cool new tool available to small businesses, and it’s more affordable than most people imagine.
So, don’t spend days sniffing out new customers while you neglect the easy sales right in your backyard. An interior design company made ad retargeting the centerpiece of its own campaign to reclaim customers, and it worked. The brand doubled monthly revenues in four months and increased client lifetime value by 29%.
- Be loyal to your loyalists
Study after study has found that it’s more cost-efficient for brands to retain customers than to acquire new ones, so give your super fans ample reason to return. Provide perks like free shipping and early access to merchandise for your best customers, and they’ll provide you the revenue to keep growing. Use social media to incentivize loyalists to refer to friends. Make fans feel like MVPs. Without discounting your product, you can invest in your loyal customers and incentivize their return.
- Strike when the market’s down
During an economic slump, like a pandemic, niches in your industry will open up as other companies contract. As your competitors fall and fail for slashing their prices, your brand has plenty of room to grow.
It’s not only retail businesses that can benefit from a sluggish market. Lots of companies saturate social media platforms when times are good. Companies stick with the relationships they know, and pickings are slim. When they raise prices or start to close, that’s your cue to swoop in, snagging clients who are unhappy with their current situation. While everyone likes a bull market, downturns offer unexpected opportunities for growth.
So, don’t slash your prices to make a quick buck. Double-down on branding, make existing customers the star of your show and seek expansion opportunities when others tuck tail. Branding Iron Management is here to help you keep your head held high in tough times, so your brand is sure to flourish when bluer skies return.