As a new entrepreneur, one of the trickiest decisions you’ll face is this: Should you price your products slightly higher to earn better profit margins, or go lower to attract more customers and boost sales volume?
This post is designed to give beginners and small offline business owners practical and easy-to-understand pricing tips—no academic jargon. Whether you’re selling a popular product with familiar market prices or a unique item offering more flexibility, the goal is to find a pricing strategy that suits your business. Here’s what you need to know.
High Margin vs. High Volume: The Basics
General Knowledge: High margins mean you profit more per sale but may see less traffic, while low margins usually lead to higher sales volume but smaller profits per unit.
However, this dynamic is not 100% necessary. Several factors influence pricing, and understanding them can help you make smarter decisions.
1. Market Competitors: Know Your Playing Field
If you’re the only seller of your product in a specific location, you have more freedom to set higher prices. For instance, imagine you’re the only coffee vendor in a school. Students don’t compare your prices with large coffee chains outside—they simply value the convenience. In this scenario, you don’t need to lower your price, even if your costs are low.
Higher pricing means fewer customers, but it can also result in the same profit with fewer cups of coffee sold. On the flip side, if you’re in a competitive market with multiple options, lowering your price to attract traffic might be a better move.
2. Business Goals: Short-Term or Long-Term?
Your pricing strategy should align with the length of your business goals:
- Short-Term Business: If your venture is for a short-term event or project (e.g., a one-year business or a festival booth), prioritizing high margins makes more sense. You may not have enough time to build a large customer base, and many customers at short-term events are okay paying slightly higher prices.
- Long-Term Business: If you’re building a business for the long haul, customer loyalty becomes key. Pricing competitively to create a reputation for value can attract repeat customers. In this case, aiming for lower margins but higher volume might help you build steady, long-term traffic.
3. Quality Control: Can You Back It Up?
If you’re leaning toward higher margins, make sure your product and service quality match the price. High prices paired with poor quality can quickly ruin your business’s reputation. Customers will perceive your product as “overpriced,” and they’ll likely look for alternatives.
Maintaining high quality takes time, effort, and energy. If you’re unsure about consistently delivering excellent quality, it may be safer to price your product lower while still offering decent value. Remember, this doesn’t mean offering “cheap” products, but rather, pricing appropriately to match your quality.
4. Product Features: Does Your Product Fit the Strategy?
Some products are better suited to high-margin strategies due to their nature:
- Perishable Products: Items like food, beverages, and fresh flowers don’t last long. A higher margin gives you more flexibility. If you have excess stock, you can reduce prices for promotions or clearance sales without losing money.
- Stock Management: High-margin pricing offers a buffer for inventory risks. When stock moves slowly, you can lower the price temporarily to boost sales while still protecting your profits.
5. Avoiding the Pricing Trap
One important mindset for new entrepreneurs is this: Start high, then adjust.
Pricing too low from the beginning can make it difficult to increase prices later without upsetting your customers. By starting with a slightly higher price, you give yourself room to lower it strategically when needed, such as during promotions or when facing unexpected competition. This approach protects your bottom line while giving you the flexibility to adapt.
Conclusion: Balancing Margins and Volume
Pricing is more than just a number—it’s a strategy that reflects your business goals, market position, and product quality. Whether you choose high margins for better profits or low prices for higher sales volume, the key is to understand your market and have a clear plan.For new entrepreneurs, remember this: Your pricing strategy should allow you to adjust when needed. Start with a higher price, stay flexible, and focus on delivering value to your customers. This way, you’re not just selling products—you’re building a sustainable business.
