After 24 years of rapid and very successful growth in the water features industry, many contractors who specialize solely in water features have been faced with a very challenging economy in recent years. Since the economy has, historically, been a cyclical beast, we can be confident that this too shall pass over into better times. The unknown is when. Still, a lot of discussion these days focuses on the question, “How do I grow my business now?”
Although there are numerous books that outline marketing practices, tools to use and specific individual business conditions to take into consideration, I still hear the question, “Should I consider raising or lowering my prices on products and services?” So, let’s briefly take a look at the pros and cons of these two options.
The Impact of Raising or Lowering PricesThere are times when a pricing adjustment may be the correct course of action. For example, rising costs and/or the need to maintain a competitive position merit this change. However, the impacts of each change on all aspects of your business need to be taken into account, along with the action steps required to complete the marketing and budgeting transition. Also, keep in mind that price does not stand alone. Maintaining a proper balance between price, quality and service for your market and client base is a basic necessity for long-term success.
Did you know that a 20 percent cut in prices and/or services means that a 400 percent increase in volume is necessary to realize the same profit dollar obtained before the price was lowered?
Before you decide to cut prices, ask yourself, “Do I feel I can increase my sales volume by these amounts? What steps need to be put in place to make that happen?”
The same precautions are necessary for price increases. Before you decide to increase prices, ask yourself, “Do I feel the market demand, clientele or quality of project will support these prices?” Some services you provide may support the change, but others services may not.
There are numerous new opportunities out there today, and I would suggest that diversification and extension of your services are much more powerful than pricing actions. Wishing you the best in 2014, and I look forward to your feedback.