Are You Charging Enough?
Three reasons why you shouldn’t be too cheap
In a crowded market, it’s easy to fall into the trap of undercutting your competitors to win business. But while it may win you the odd booking in the short term, as a long-term business strategy it’s fatally flawed.
Here are three reasons why you shouldn’t be too cheap.
1) You’ll drive prices down
If a parent likes another provider but you’re much cheaper, they have three options:
1. They can go with you, their second choice, and pay less.
2. They can go with their first choice and pay more.
3. They can go back to their first choice and haggle.
And what happens if a parent chooses option three? They’ll possibly haggle your competitor down, and tell their friends how little they’re paying. And suddenly the new lower price becomes the ‘right’ or fair price in the minds of your potential customers. So if you continue your cut-price strategy, you’re just left under-cutting your own discount, driving prices down and down.
Rather than compete on price, it’s much better to identify a clear USP, something you do or offer that parents will value, and that sets you apart from your competition, and makes you the only choice for them.
2) You’ll be seen as lower quality
Which would you expect to be better quality? A £3,000 handbag, or a £3 one? Most people associate cost with quality, so if you advertise your services too cheaply, parents will assume that you offer a lower quality product or service than your competitors.
Again, long-term this isn’t a great business strategy. For parents that make decisions based on quality, not cost alone, this immediately discounts you. It also makes it tough to raise your prices in the future. In the mind of your customers, your business is in the ‘value’ bracket and they’re unlikely to want to pay more later on.
So instead of simply going cheap, establish where on the quality hierarchy you think your business sits, and confidently price accordingly. So the parents who are looking for businesses in this bracket know you’re the right one for them.
3) You’ll become resentful of your work
To run a successful business you need to love what you do – especially if you work with children. If you have fallen out of love with your work, it will soon come across. And that’s just what you risk by charging too little for your work. You’ll become resentful of putting the effort in for so little return. You could even find yourself cutting corners to try to make it more cost-effective – maybe by buying cheaper supplies or putting less effort or props into your act.
Eventually you could end up half-heartedly running a business that obviously looks for cheap options to maximise their profits. And as you’ll discover, word will soon spread, and poor reputations are hard to shake.
So stick to the price you believe you’re worth, and enjoy giving your customers great value for money.
Need to attract more customers?
If you’ve got a great business and are charging the right price but not attracting customers, we can help.
Join Kallikids and we’ll help promote your business to thousands of parents looking for recommendations for safe and fun clubs, classes, places to go or family services. You’ll also have access to marketing and social media tools that teach you how to put your business firmly on the map.