Pricing your product or service can be one of the most difficult challenges businesses and independent freelancers face. Too low and you may not be profitable, too high and you risk driving existing customers away or you fail to attract new ones.
In Germany, setting the correct pricing strategy can be fraught with danger . A pet hate of businesses and consumers in Germany is inflation. This has historical roots from the hyperinflation of the Weimar Republic in 1923, through to the late 70’s, 80’s and 90’s when Germany experienced 6-8% consumer price inflation or CPI.
A price that is too low could cause doubts by the customer as to the quality of the product or service. Conversely, if the price is high, the product and service better be pretty darn good. Normally, most businesses aim to be somewhere in the middle.
We should also aim to establish more value by reinvesting some of the profit derived from our customers into products, technology or services that clients can benefit from. For example, you could do a YouTube/Facebook viral video featuring some of your customers, run video conferencing sessions, upgrade the website, integrate your calendar (to make scheduling meetings with your clients easier) or develop a deeper conversation with the customer though more insightful and meaningful feedback.
After you have determined your price point, you may also want to think about when to increase your price and by how much. It is always a good idea to inform customers a month or so before you increase your price. This gives them time to prepare and adjust. Even if it’s just a few cents or a €1 increase, you should write a letter or email advising customers of the change. If you establish a routine that your prices go up a little every year or by 10% every 3 years, you should still formally communicate any price increase.
If inflation behaves itself and you’re happy with your price level, you may also want to point out to the customer that there will be no price increase this year, especially if they are used to you increasing your prices a little each year.
Increasing prices can be scary in Germany, but it doesn’t have to be if we follow a few simple rules and clearly communicate how we are adding value and demonstrating the quality of our product and services.
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