According to SCORE, the Small Business Association’s (SBA’s) education and mentoring partner, 80% of small business owners underprice their products or services. Unfortunately, it is those prices that determine the operation’s profits and play a role in whether customers will deal with the business at all.
Understanding if prices are too low or too high is important to the success of every business that caters to the firearms and hunting market. Even more important is how prices can be increased to cope with today’s tariff-driven economic climate. After all, raising prices without losing customers or clients remains a ticklish situation.
Market Fluctuations
Shifts in supply and demand, customer preferences, competition and today’s economic uncertainty can all cause a hunting retailer to raise or lower prices. Changes in buying behavior can force any business to adjust prices.
On the one hand, a sudden demand for a product could lead to a shortage and higher prices. In this case, it is the market that is bidding up the price because they want more of it. Where supply exceeds demand, suppliers will often lower their prices to encourage increased sales.
The Right Price at the Right Time
At its most basic, pricing that is all-so-essential to the operation’s success is defined as the process of placing a value on a service or product offered by the business. Pricing the goods or services effectively increases the operation’s ability to sell profitably, thereby contributing the growth of the business.
Regardless of why they are needed, pricing methods or strategies offer a variety of different approaches to determining the cost of goods or services. Among the strategies or methods commonly used to set prices are:
* Cost-plus pricing means calculating costs and adding a profit margin.
* Competitive pricing involves setting a price based on what the competition charges.
* Penetration pricing means setting a low price to enter a competitive market and raising the price later.
* Bundling occurs when low-margin firearms are combined with accessories, training or cases, creating attractive package deals.
* Value-based pricing involves basing the price of the operation’s products or services on the customer’s estimation of it sworth.
* Price skimming is setting a high price and lowering it as the market changes.
Setting prices for any retail business involves balancing cost-plus, competitive and value-based strategies while factoring in the operation’s high overhead, local market demand and their competitor’s pricing — especially that of big-box or large online retailers.
Understanding the different pricing strategies can help a retailer maximize profitability and market share. However, it’s important to remember price increases may help the operation’s bottom line, but their impact will be felt by the customers targeted. Also keep in mind that the more prices are raised, profitability may drop as sales decline.
Key Pricing Factors
Establishing prices can’t be accomplished on a blank slate. There are a number of factors that must be considered, including:
* The manufacturer’s suggested retail price (MSRP) is often inflated, with the actual prices of hunting retailers usually lower.
* Large online retailers often sell close to cost, forcing local business to compete on service, transfers and a unique inventory.
* The data revealed when managing inventory is used to cut slow-moving products and re-invest in fast-moving goods, freeing up capital, and
* Including value-added services such as gunsmithing, safety courses and transfer fees to the operation’s overall pricing structure.
Pricing Adjustments
A pricing adjustment is any modification made to the original price of a product or service. Pricing adjustments are frequently made in response to factors such as market conditions, competitive pressures, strategic business goals and, of course, cost changes.
Changing costs are the most common reason for price adjustments today. Changes in costs have forced many tactical retailers to increase prices in order to remain profitable.
Obviously, making adjustments to prices is an important factor in managing any operation’s revenue and profitability. It can’t be emphasized enough that the price of a good or service significantly impacts whether or not a customer will value the product and make a purchase.
Discounts
Discounts are a two-way street. On one hand, a hunting retailer’s prices may be affected by the so-called “trade discounts” offered by suppliers if payment is made in a timely manner and/or in cash. The amount of trade discounts is typically 1 or 2% if payment is made within 10 days; full payment is usually required within 30 days if the discount is ignored.
For a retailer, a discounted price may be offered for prompt payment, to a special group of customers, for quantity sales or merely to stimulate sales. In other words, the business is offering to make a sale for the listed price reduced by the amount of the discount.
On the downside, even a small discount may reduce the bottom-line profit. On the upside for small retailers, some manufacturers use Minimum Advertised Pricing (MAP) that can prevent large retailers from selling below a certain price.
Raising Prices and Retaining Customers
Making price adjustments is an important aspect of managing revenue and profitability. The price of a good or service impacts whether or not a customer will value it and make a purchase. Strategic pricing adjustments are often the determining factor of success.
It’s no secret that many businesses are facing inflation, supply chain disruptions and tariff threats, making it more expensive to conduct business. Those same pressures are also affecting the customers of many hunting retailers.
In response to these pressures, far too many businesses believe raising prices is the solution but are afraid of alienating customers. Is it possible to keep customers and to raise prices?
Success may lie with these strategies:
* Be transparent. Today, everyone is aware of economic conditions, so telling customers about price increases merely confirms their expectations, and most will accept it
* Don’t overexplain. Customers don’t need details, such as the operation’s profit margins or how the business is being squeezed by higher prices. Simply relate the facts, such as when the price increase takes effect and what the new price structure will be.
* Don’t apologize. Appearing tentative or nervous are often signs of a willingness to negotiate. Negotiating is a no-no, as is offering deals to some, but not all customers —because customers talk, resulting in losing some business.
* Consider adding fees or surcharges. Adding fees or surcharges can be risky, as some customers will expect these additional fees to eventually disappear.
Price Decreases
Prices don’t always have to go up. Price reductions are frequently used when a business wants to increase sales, attract new customers, etc. However, as with price increases, there are various strategies to consider.
If the goal is to promote other, higher-value products or services, the price might become a so-called “loss leader.” In other words, prices will be lowered on certain products or services to attract customers and encourage them to make other purchases of regularly-priced goods or services.
Limited-time offers are more common among retailers who employ seasonal discounts and flash sales to help move inventory. They create a sense of urgency, since buyers know the deal is only available during a specific time frame.
Another way of offering lower prices is with bundle pricing. This strategy involves combining multiple items or services into a package at a discounted price. Customers feel they’re getting more value for their money and may compel them to buy.
Going With the Flow
Almost all businesses are suffering the effects of inflation, supply chain disruptions and the threat of tariffs. These factors have all impacted the hunting retailer’s expenses, making it more expensive to conduct business. And, remember, those inflationary pressures have also affected the operation’s customers.
Many business owners believe raising prices is the solution but are hesitant out of a fear of alienating customers. However, pricing is an important aspect of every business selling products or services.
Seemingly very simple pricing is a process that will have a significant impact. Keeping customers despite raising prices is not, as explained, that complicated.
Keeping customers while raising prices is about being open and honest while continuing to offer excellent customer care. Satisfied customers will pay more because they’ve come to know, like and trust the business. Maintaining that trust is the key to success.
It should be noted that some businesses add fees or surcharges as a solution for a temporary situation such as those recent price surges. This can be risky, however, since the operation’s customers will expect those additional fees to disappear when that situation changes.
The optimal price of the operation’s products or services is the price that will enable it to earn the most profit as possible while maintaining the trust of customers. Of course, on the downside, in many situations, as soon as prices are raised, profitability will drop because sales will decline.
Fortunately, it is possible to keep the business’s customers and raise prices. All that is needed is a well-thought-out strategy by the tactical retailer and keeping the customers informed at every step. Professional guidance can also help.
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