My business making dog boxes is going ok, at least I made a modest profit last year, from a loss the year before. And so far this year Jan and Feb have been substantially better than the same time last year.
My original intention was to offer a really nice box with extra features like proper locks and a thick rubber mat, but at a really competitive price, and to try and do a 'Hyundai' ie. get a few out there and then bring the prices up to somewhere near the competition. As the natives are a bit funny about new stuff (hence the V70 being the best selling car) it's a slow process. Everyone that has come to see the boxes has bought one, and I get a lot of recommendations from existing customers. It seems that once someone buys one and their mates see them, them it leads to more sales. I've sponsored a couple of doggy people and this has been very successful.
Traditionally here, dog boxes have been a steel frame and weld mesh. Very quick and easy to make, but pretty nasty with welded on regular door hinges and a padlockable sliding bolt for the doors etc. Mine are an ally frame and doors, with a welded plastic shell (usual in the UK), but new to this market. But as a result they're pretty labour intensive to make.
But I really need to increase my profit per unit. So I was thinking about upping my prices by 25%, which would increase the profit by 50%, and bring them more in line with my competition. My rational has been to be cheaper, but does this really work? Undoubtedly some people only buy on price, but many don't. I mean, the guy that turns up in a new Passat estate to look at my boxes obviously didn't buy the cheapest car he could find. Maybe being cheap actually puts people off as they think it's a cheap rubbish product, which it isn't. One problem with raising prices is it may be hard to tell if there is any impact on sales, as they fluctuate so much from month to month. Some months last year I turned over £800, and other months I did over £4000.
So what do you guys think. Bite the bullet and see what happens, or play it safe and try to increase sales first?
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Try it and see. Make sure you highlight the higher quality of your boxes.
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Hi Dave - what is the average price currently of your boxes versus the competition and what if any superior quality or usefulness benefits can you claim? I know you said you're 25% cheaper but what I'm getting at is you probably still want to be noticeably cheaper / better value but not necessarily by a factor of 25%.
If you can still make a claim of "cheaper and better" you're ok to sneak your price up a bit but I'd be wary of being same price versus same quality against your competitors. Not the least reason for your success so far will be those very value judgements made by your customers I'd guess.
Sounds like you do have some room for margin improvement but my advice would be go steady and keep yourself price attractive. Maybe split the difference, go for a 12.5% increase and see what happens?
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I'm no businessman Dave, i can only comment from the perspective that SWM and i will pay a higher price for a bespoke item or service....whereas neither of us will buy a coffee from any of the national coffee chains at their ridiculous prices in their ridiculous cloned coffee shops.
If the item is well and thoughfully made for a long working life then it will stand a considerably higher price than the usual online auction tat on offer from hundreds of sellers, many of us will always give the local business the custom if we can and don't mind paying extra for the privelidge uif the service or item is better.
Do you stress the hand made aspect and superior quality of your product, some years ago we bought an outside mailbox as we have deliberately forgone a normal letter box, we could have bought so so tat very cheaply instead we bought from the company linked below, better product at a higher price...quality is never cheap and nor should it be within reason IMO, if your product is good people will buy.
I'm only linking this company as an example IMO of a good advert and website..
regalmailbox.com/
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Is there any way you can offer an upgraded product with some extra features?
I ask because you could then market this at a higher price and see if you get any bites while retaining the original products reputation for the lower price.
If you wanted to test the pricing strategy on its own, maybe raise the price to half way between the original price and nearest competitor, to test whether people will pay extra for a still cheaper product, or discover you have scared the horses and its low price that makes the sales.
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Should I increase my prices? - Zero
