Would you put up your prices during a recession? You might well be considering the reverse right now.
Yet, this could be the ideal time to raise your prices, especially if you’re in a service-based industry.
Why increase your prices in a recession?
- Your marketplace is already different from how it was a short while ago, so why not shake it up some more?
- The potential clients that are seeking your services are in the market to buy. They need what you’re offering so the price could be less of a factor.
- Spending decisions take more consideration, but ultimately potential clients want to buy the best. They know they won’t get that with cheap and cheerful.
- If you charge higher rates, you can afford to take on less work and give your clients greater attention. They’ll love you for that and will be more likely to refer you to other similar clients. And so your premium client base grows.
- If clients are harder to come by, it makes sense for you to have fewer yet more profitable clients to make up your income.
- The premium end of the market is the least competitive, and less competition is a bonus right now.
What’s the alternative?
You could cut your fees as a strategy to increase market share.
But then you run the risk of entering the ‘race to the bottom’ – you cut costs, your competitor cuts costs. The cycle continues until one of you is no longer making a profit and does not have a viable business.
Reducing your prices will attract new clients, but it’s unsustainable.
So, what would you choose?
I’m not suggesting that raising fees in the current economic climate is right for every business, but it’s definitely one to consider. Who wouldn’t want higher income, greater profits, happier clients and less competition?