As a business owner, sharing how you arrive at product pricing with your customers might appear antithetical to maximizing profits. However, transparency in pricing can be a powerful tool that wins customer loyalty during tough economic times and can gain your business new customers in the process.
The suggestion of merchants revealing their cost structures will run into a wall of resistance among many business owners. They worry that when given access to financials, frustrated and angry consumers will not be shy about criticizing your methods. At worst, they could assume that you are simply looking to profit at their expense.
Conversely, patrons would very likely appreciate your willingness to be honest and show that you respect their loyalty. By shining a light on your operations, especially in today’s uncertain economy, merchants would show that they empathize with shoppers’ monetary struggles. Customers, in return, would better relate to your own difficulties.
Countless individuals and families are facing enormous challenges in keeping their own businesses afloat, meeting company goals and deciding how to reduce their household budget.
When a business owner conveys their own paper-thin profit margin with hard numbers, it fosters a ‘we’re all in the same boat’ situation. This could lead to merchants and patrons rooting each other on to persevere until better days arrive.
You may be surprised to find people willing to pay for more items at your community establishment than feeding the coffers of chains and corporations. The resulting word-of-mouth about your integrity and sincere concern for the buying public would attract an entirely new fanbase.
Some factors to consider making public include mounting increases in supply chain and raw materials costs on top of surging import fees and inflation.
There are additional massive increases that business owners and customers share alike. The list includes spiking health insurance premiums and utility costs, ballooning lease and rent payments, untenable mortgage rates.
Proprietors may also want to convey the year-over-year percentage increases to further connect with people that you both are suffering shared and continuous economic pain.
This is especially important for local businesses that are part of the tapestry of the neighborhood. You would not be the only business in town that is under extraordinary duress. The shop local movement is proof positive that people will spend extra to support downtown businesses.
Even during prosperous periods, it is exceptionally difficult for retailers to stay afloat. Some 20 percent of new businesses fail in the first year. The number jumps to 50 percent within the first five years, while a staggering 60 percent fail and close shop after five years.
It is also important to be proactive in explaining expense breakdowns. Consumers these days, more than ever, conduct their own research and analyses to make best-informed decisions on where to expend limited dollars.
Pricing transparency is an effective means of communicating the harsh cost of doing business that results in higher prices. Doing so can see your customers stop seeing red and help you walk a delicate tightrope to stay in the black.
