Photo (CC) by Ken Teegardin, on Flickr

Many small-business owners fear that an increase in prices will drive customers away.

This idea made the headlines in 2016 when New Jersey implemented a substantial gas tax increase making prices jump 10% or more overnight. Gas station owners were concerned that people will go somewhere else for cheaper prices or to other transportation alternatives.

While such a concern seems valid, research finds that moderate price increases are often perceived as more or less acceptable by consumers.

The case in New Jersey is less problematic for business owners as all businesses are faced with the same change. But what happens when you need to raise prices but your competition may not. Will people leave, our perception, or will they stay, quite often the reality.

First, you, the owner, must understand that it is not price alone but several factors that determine customer behavior in terms of where they shop. The first of these is how often we buy a product or service. The more often we buy something, the more likely it is that we will both recognize that the price has increased and perhaps have use considering a change.

Another factor is the cost of the item. Higher-priced items use a larger portion of our household income. This makes us, again, the more price conscious. Yet the type of item also comes into play. Sales of what might be considered vanity products will not see the drop in demand that other products might.

Price awareness also depends on how visible the price is to the consumer.  For this one, think about service stations and the billboards reflecting current prices. Price is highly visible and, because of that, we are more likely to be aware of increases, decreases and how you compare to your competitors.

Also, you must consider how other products can be interchangeable with yours. Gasoline is basically a commodity, meaning one brand is much like the next.

Things that help ensure your customers return to your store include habit. We tend to go where we have in the past.

Also, the customer thinks about the actual or perceived value of your brand. We all go to places where we like the service, the store, how we are treated, the feeling we get our money’s worth, etc. And we will continue to go back even though prices may not be as cheap as the store next door or the several stores we drive by to get to our favorite location.

Finally, there may be factors such as a desire to shop local or support small businesses can influence one’s reaction to a price increase.

All of these factors make it difficult to fully anticipate consumer reaction to price changes. And the good news is knowing price increases can be implemented.

So what can you do to make price adjustments less likely to send customers away?

• First, know why you are doing it and, when asked, have your thoughts gathered as to why you needed to make adjustments.
• Second, don’t surprise people especially if the increase will be significant in either dollars or percentages. Some owners even take advantage of it with a sale to encourage early buying. That can be a good idea but realize it will definitely impact your cash flow.
• Third, make regular adjustments. When people know you change your prices on a regular basis, the changes have less of an impact.
• Fourth, understand your own profit margins and what the data is telling you. Know what you need and how changes may affect your cash flow and revenue picture. This knowledge allows you to consider how, and even if, you implement a change.

As a small business owner, it’s important you not fear making a price adjustment. Pricing, it is said, is part science and part art. Mostly it’s knowing your customer.

Photo (CC) by Frits Ahlefeldt, on Flickr

Do you steer away from the competition? Or do you embrace the opportunity and locate beside your competitors?

Often small-business owners will tell you that they would be happy if they had no competition. Yet having no competition may mean you are selling something that no one wants.

Given that thought, the same owner may say that competition is all right as long as it’s not located close to his or her store. But is that a good idea?

A recent road trip found me on the highway for nearly 1,500 miles. During that time, I had a visual reminder about competition and clustering. What you will notice, as I did, is that if one hotel or gas station or restaurant is at an intersection, a second one or even more may be at the same location.

The reason this occurs is the same reason why many other types of firms will locate near their competition: Clustering makes the entire group stronger.

Research has verified the strength of clustering in many industries. Clustering allows the consumer a choice. Having more selection will draw more customers than just one business of any type. It not only draws customers, but those businesses often will see higher revenues.

Clustering helps the group become viewed as a destination. This certainly is true in the tourism industry, but the same has been found for manufacturers as well (i.e., why is it called Silicon Valley?).

Not only does clustering increase the destination perception, but related businesses also may begin to locate in the same area. These businesses might offer complementary goods and services, thus further increasing the customers’ perception of value. Or these businesses might be suppliers, therefore reducing supplier costs of production.

Thus, as a small-business owner, competition may be a really good thing.

Photo by bjmccray, on Flickr

“If you build it, they will come” may work in the movies. But for small businesses, it is a myth.

People will only come if they know you exist and they know where and how to find you.

You would think that finding a business today is pretty easy given the mapping apps available and the mobile technology we carry with us. And yet, how many times have you walked or driven around trying to locate that store you were told was right here.

This frustrating endeavor happens for several reasons. The most common of these reasons are, first, as a small business owner, we fail to check the online information about our business, including its location, to ensure it is correct. And we may forget to ensure to update that information when we move or simply to make sure nothing has changed.

A second reason, however, why a business can’t be located comes from one simple mistake, not having a sign out front that people can see or that can be read.

Sometimes a zoning regulation, city code or property covenants might be a part of this issue.  My daughter has lived in communities that have lots of trees and shrubs and that limit how high up signs can be located. I found it very frustrating to find the place I wanted in those towns.  If this is the case, you may want to discuss the issue with other business owners to determine if something could be done.

When designing your sign, consider:

• Orientation. Should it stick out from the building or if it should be across the front of the building or both?
• Font size. The faster the traffic moves by your building, the less time they have to catch your sign. And it is not only the speed but the amount of traffic a person may also be dealing with as well.
• Font typeface. Fancy script or some other unique font is not what you should use. It may be part of your brand but it may make your sign difficult to read
• Color. Use bright, bold colors with substantial contrast between the lettering and the background
• Lighted. Even if your store isn’t open in the evening, lighting your sign gives people a chance to see it and consider coming back some other time.
• Amount of information. Keep the amount of information limited, again to make it easier to read when passing by.
• Sign maintenance. Keep it painted; make sure the lights work: if a letter falls off, get it replaced.
• Multiple signs. Depending on your location, you may need to have more than one.

Not only can signage help people find your business but it can also bring in people who are just passing by. The key factor is your sign must catch the consumer’s eye and tell them enough about what you do as to encourage them to come in.

One final suggestion in terms of a business sign comes if you are in located in a common parking lot with other businesses.  If this is the case, you may need a sign on your business as well as having a presence on a group sign to help bring people off the street.

Signage alone can’t be your entire marketing effort. Yet, it has great value in helping the customer make it into your door. Don’t miss out.