With the emergence of digital, there has been a significant increase in online marketplaces – as most people search for service providers online. In this lucrative environment, pricing is one of the most critical factors behind customers hiring decisions. And that’s one reason why service providers should set competitive prices.
According to research, online shoppers visit at least three websites before making a final purchase decision. A recent study shows that 96% of buyers plan to cut costs, finding cheaper/competitive prices for products and services.
This clearly shows that for online shoppers, pricing and price comparisons are critical factors that impact the buyer’s journey. Let’s explore why you should set competitive prices as a service provider. Keep reading.
The Power of Competitive Pricing
Let’s explore the compelling reasons why service providers should set competitive prices.
1. Gain an advantage with lower prices
Competitive pricing is a game-changer for businesses seeking to expand their customer base. By offering lower prices than your competitors, you create an irresistible incentive for customers to choose you.
As the price of goods and services skyrocket every moment in Kenya, more people are finding cheaper alternatives. Statistics show that 64% of buyers are willing to switch suppliers due to lower prices.
Therefore, you can succeed in setting a slightly lower price for your services. However, don’t exploit yourself in so doing.
For instance, if you are offering your services through the Balozy platform, you can set different levels in which you offer your services. You can have premium and basic services at different price levels. For each service category, ensure you deliver your best to maintain your clients.
When customers find value in the affordability and quality of your services, it becomes easier to win their loyalty.
2. Seize a bigger market share
You will capture a larger market share if you implement a competitive pricing strategy as a service provider. By setting prices that are attractive and aligned with customer expectations, you can entice customers who were previously loyal to competitors.
This idea is especially effective if you’re operating in a saturated market, as competitive pricing helps businesses stand out from the crowd and win over new customers.
For instance, there are hundreds of cleaning services companies in Nairobi. And if you are a cleaning service provider, you might find it difficult to penetrate the market.
However, the Balozy platform can help you market your services better. For example, you can set competitive prices and offer something special to your clients. That will give you a competitive edge against the bigger companies in the city.
3. Boost revenue through increased sales
Competitive pricing is a proven way to drive higher sales and increase revenue. When you offer better prices, customers are likelier to engage you, bolstering sales volume.
A McKinsey study shows that a 1% improvement in pricing strategy drives 11% of revenue to your business. Thus, setting competitive prices can help expand your customer base and drive overall revenue growth.
Service providers should set competitive prices to attract new customers who may not have considered your services.
However, don’t compromise your service quality by setting lower prices. You can reduce the amount of work and reduce the price. That will be a better option than ruining your reputation.
4. Stay ahead of the competition
Constantly monitoring and adjusting prices is essential for staying ahead of the competition. You can proactively adapt and ensure your prices remain competitive by vigilantly tracking market trends, consumer preferences, and competitor pricing strategies.
This agility enables your business to maintain its position as a market leader and avoid being overshadowed by rivals. In addition, adding value while setting competitive prices can help you stay ahead of the competition.
Study shows that customers are willing to spend money on where they get value, regardless of the brand. Therefore, offering excellent services can give you a competitive edge against your competitors.
5. Reduce costs through pricing optimization
Optimizing your pricing strategies can lead to cost reductions and improved profitability. You can offer discounts for bulk purchases or adjust prices for underperforming products or services, thereby optimizing their costs.
For example, you can have different pricing sets for your services as a cleaning service provider. You can have a full-board cleaning service and half-board. This could mean that full board cleaning can entail washing clothes and utensils and cleaning the house.
You can give discounts to a customer who prefers full-board cleaning services. These savings contribute to healthier profit margins, enabling you to sustain a competitive edge while keeping your clients.
6. Foster customer loyalty with better value
Competitive pricing creates better value for customers, leading to enhanced loyalty. When you offer better prices than your competitors, customers feel they are getting the most out of their hard-earned money.
A recent study shows that 68% of customers are willing to pay more for high-quality goods and services. This data shows that customers are willing to go the extra mile to get high-quality. That’s why service providers should set competitive prices to win their client’s loyalty.
This satisfaction with value for money fosters loyalty, ensuring customers continue to choose your business over rivals.
7. Improve profit margins through increased sales volume
Competitive pricing can yield improved profit margins by driving higher sales volumes. While prices may be lower, attracting more customers for your services compensates for the reduced margins. Moreover, you can benefit from economies of scale by purchasing materials in larger quantities, negotiating better deals with suppliers, and maximizing efficiency.
As a service provider, you can improve your profit margins by joining the Balozy platform that links you with potential clients. In addition, the app allows you to set competitive prices for your services. In addition, you can build trust through customer reviews on the platform.
8. Create a perception of fairness
Competitive pricing creates a perception of fairness among customers. When you offer prices on par with or lower than your competitors, customers feel they are treated fairly. This perception fosters trust and goodwill, enhancing the customer experience and strengthening the business-customer relationship.
As a service provider, you should offer your customers uniform services and equal prices. This will show customers that you offer value for money, which will grow your business.
9. Cultivate positive word-of-mouth and referrals
Competitive pricing encourages positive word-of-mouth marketing and brand advocacy. Satisfied customers who find value in affordable prices are more likely to recommend your services to their friends, family, and colleagues.
Statistics show that 18% of customers acquired through referrals will likely stay loyal to your business. This organic promotion amplifies your business’s reach, attracts new customers, and enhances its overall market reputation.
10. Enhance brand image with affordable quality
Businesses can bolster their brand image by offering high-quality products or services at affordable prices. Customers appreciate companies prioritizing value for money and providing a seamless blend of quality and affordability.
With competitive pricing, you can cultivate a positive brand perception and build long-term customer loyalty. That’s why service providers should set competitive prices.
Mistakes to Avoid When Setting Competitive Prices for Service Providers
When deciding on the prices for your services, it’s crucial to avoid mistakes that can harm your business’s success and profits in the long run. Here are some common pitfalls you to avoid:
- Competing solely on price: While it’s vital for service providers to set competitive prices, relying only on low prices as your main selling point can lead to a race where everyone keeps lowering their prices. Instead, focus on what sets you apart, like high quality or excellent customer service, to justify higher prices and build a strong advantage over your competitors.
- Setting prices too low: Remember that some customers are willing to pay more for high-quality services. If you undervalue your product or service by setting prices too low, it can make people think it’s of low quality or not worth much. Even though it might attract price-sensitive customers, it won’t generate enough revenue to cover your costs and make a reasonable profit.
- Ignoring the value of your services: Your pricing decisions should be based on the value your offering brings to customers. Consider your product’s uniqueness, benefits, and the problems it solves for customers.
- Underpricing a service: Underpricing services not only undervalues your expertise but also limit your ability to invest in growth, training, and providing exceptional service. Consider your expertise, experience, and the time and effort required when determining service prices.
Wrapping Things Up
Competitive pricing is a powerful tool for businesses seeking to gain a competitive edge, capture new customers, and improve their bottom line. By adopting a strategic approach to pricing, service providers can reduce costs, boost revenue, improve customer satisfaction, and enhance their brand image.
As a service provider, you should assess your value and set prices that reflect that value. By understanding and quantifying the value you deliver, you can set prices that match that value. Ultimately, businesses prioritizing competitive pricing and value for money will be best positioned for long-term success in today’s fast-paced business landscape.
If you’re a skilled professional looking to grow your business, sign up with Balozy today and start connecting with customers in your area.