Want More Customers? Raise Your Prices!

Arrows Going UpSmall business marketing is one of the essential, non-stop elements of running a small business – but too many small businesses make the mistake of “thinking small” when it comes to pricing their products and services. Even if you’re in a saturated market with lots of competition, even if you’re going up against the 800-pound gorillas of your industry, if you want your small business to succeed you should not try to compete by cutting your prices.

Many small business owners mistakenly think that they can’t win unless they offer low prices. They might think that customers will reject them, or they will lose repeat business, or they won’t be able to compete unless their prices are lower than anyone else.

There are many problems with this line of thinking. For one thing, cutting prices is bad for your business and for your sanity as an entrepreneur. If you are constantly cutting your prices, you are undermining your success. You are taking away that comfortable profit margin that acts as your protective cushion and keeps you afloat. If your prices are too low, you are giving up your “safety net” and exposing your business to the risk of losing money.

But even aside from the immediate effects on you and your business, lower prices are not necessarily what your customers want. Here are three reasons why cutting your prices is not the answer to find new customers and win customer loyalty:

  1. Most customers don’t buy based on price alone. Price is not usually the most important factor in why people decide to buy from you (and many research studies have shown this). There are multitudes of complex factors that go into every customer’s buying decision, including convenience, value-added service, customer reviews and recommendations, prestige, the overall customer experience and the way your business makes customers feel about themselves. Think about your own life as a consumer: how often do you go into a store determined to buy only the lowest-cost options? When you’re hiring a contractor to work on your house, or hiring professional service providers for your business, how often do you hire the lowest bidders? If price were the most important factor, we would all buy only store-brand and generic products, and private colleges would go out of business because everyone would go to community colleges and state schools. Of course, this hasn’t happened – because lots of people are willing to pay more for higher-priced products and services, for a variety of complicated reasons.
  2. You don’t want to be like Walmart. Huge companies like Walmart can compete on price because they have massive buying power and sell a massive volume – enabling them to be profitable even with razor-thin margins. But most of us are not Walmart, and are never going to be (and don’t want to be). And even Walmart has had trouble competing on price in recent years – when price is the only reason for people to buy from you, you will lose your customer loyalty and find yourself constantly fighting for scraps. Discount retailers like Walmart are serving a certain segment of the market, but not everyone wants to compete (or needs to compete) in that same space. Many customers don’t want the “big chain store experience” of under-staffed stores, over-worked employees, crowded aisles and drab surroundings. If your small business can give customers a better experience and better value for the money, they will gladly pay more than they would pay at the “Walmarts” of your industry (whichever industry that might be).
  3. Send the right signals. Setting prices is not just about maintaining profit margins, it’s about sending a message to your customers. Higher prices often are a “signal” of higher quality in your market. Do you want to be a “cut-rate” option, or a “premium” option? Do you want to be a fast food place, or a gourmet restaurant? Do you want to be a “base model” car or a Lexus or BMW? There are customers who want to know that they’re buying the “right” product or hiring the “right” service provider – and paying a higher price is a way to signal to these customers that you are one of the best options on the market. Another reason not to cut your prices is that you’re surrendering your profit margins even when people might have willingly paid more – cutting your prices might result in leaving money on the table!

Cutting your prices is not the right way to compete if you’re trying to succeed. Don’t sell yourself short. Instead of lowering your prices, show your customers the value that you provide. Help them understand why your business is the right choice to help them with their needs. When customers love your business and appreciate the value that you deliver for them, they won’t feel the need to haggle over price.

CorpNet is a small business helping small businesses! We help entrepreneurs start a business by managing the business filings to incorporate a company. Whether you want to form an LLC or S-Corporation or other corporate entity, CorpNet can help you choose a business structure with a free business consultation.

2017-12-28T06:06:09-07:00 December 29th, 2011|Categories: Startup and Launch|Tags: |

About the Author:

Nellie Akalp
Nellie Akalp is an entrepreneur, small business expert, speaker, and mother of four amazing kids. As CEO of CorpNet.com, she has helped more than half a million entrepreneurs launch their businesses. Akalp is nationally recognized as one of the most prominent experts on small business legal matters, contributing frequently to outlets like Entrepreneur, Forbes, Huffington Post, Mashable, and Fox Small Business. A passionate entrepreneur herself, Akalp is committed to helping others take the reigns and dive into small business ownership. Through her public speaking, media appearances, and frequent blogging, she has developed a strong following within the small business community and has been honored as a Small Business Influencer Champion three years in a row.


  1. AJ Ogaard December 29, 2011 at 9:53 am - Reply

    Show you customers the ‘value.’ This is really important post I hope others read and take to heart what you share. People want their needs taken care of and want to feel you are there for them. You point out the 3 important areas that truly make sense with how to differentiate yourself and keep people interested in doing business with you and your business.

    Personal Note:
    Years ago when I worked within a large company as a manager, my GM wanted me to cut prices and ‘blow out’ a certain product. We did not see eye to eye but I tried it his way and no one purchased the product. The perception was, ‘there must be something wrong with this.’ To test out my idea, I increased the price and the product was consumed and disappeared.

    Consider all the quality areas that you can offer and build quality relationships. Your customers will take notice and will look forward to doing business with you as well as tell their friends.

  2. […] something more cost-effectively than they’re doing it now? This does not mean your business should try to “compete on price.” It’s OK if your product or service costs more than the competition, but you need to save so much […]

Leave a Reply