I see that some people running RETAIL businesses have uncertainty about selling. Here are some things to keep in mind …
Consumers will not pay an excessive price for any product. Even if there is no competition, consumers have a sense of VALUE and will not overpay. Consumers will pay a higher price for a higher value product, but there is a limit to what they will pay.
Value is based up on the manufacturing QUALITY and FEATURES … which is the COST OF GOODS (to the Manufacturer) … not what the Retailer pays. In other words, a Retailer cannot increase the value of a product … value is determined through manufacturing.
As you raise your prices beyond what it should be, then fewer and fewer consumers will purchase. This means your sales will start to slow down at a certain price (we call that the SLOW THRESHOLD) and as you continue to raise prices, eventually no one will buy (we call that the STOP THRESHOLD).
So, what’s the right price? Well, that depends on the value of the product, the consumer groups you are targeting and how closely your product matches their needs, the country you are in, and competition you may have.
You have to experiment to find the most profitable price. And take note that your experiments are affected by competition … making this a challenging exercise. Welcome to the real world of business!
The best way to experiment with price is to start with a lower but profitable price, then slowly work your way up. You can also start with a very high price and work your way down, but you may find that more challenging and you may lose sales and money while waiting to find the right price.
As a RETAILER, you have several stations you can turn ON/OFF. Take note that some of these stations help you achieve more sales (like Salespeople), while others help DIFFERENTIATE you from COMPETITORS in your same COUNTRY. If you have no competition, then differentiation may not be as useful an investment.
But, take note, that having SALESPEOPLE does not EARN you more sales. It only allows you to MEET DEMAND that you are generating through your product quality/features and price. In other words, if you have an excessively high price, it won’t matter how many salespeople you have because customers are not interested in buying. Similarly, if you create a lot of demand but do not have enough salespeople to service customers, then you will miss out on sales.