How many times have I heard literal horror stories from Internet business startups? Too many times to count! I get emails from those who just simply cant seem to make a living online. Theyve tried everything (according to them) and are still struggling to make ends meet.

At some point, the "conversation" always turns to price. Thats where I find a lot of online business people making their mistakes. The common mindset among Internet business startups is that you have to keep your prices rock-bottom low in order to attract customers.

Nothing could be further from the truth! Raising your rates (in some cases) can actually increase your business. How so? Here are several reasons....

1. People Equate Price With Quality

Im sure youve heard the expression, "You get what you pay for." That statement comes from a long line of lessons learned by people across the globe who have bought something at a discounted price and regretted it later.

Maybe the product was used. Maybe it was made with inferior materials. Perhaps a "discount" service they tried fell through and left them in a fix. It could be any number of reasons, but those who have tried the "bargain" or "discount" route and have been burned are quick to look for higher priced products and services. It makes them feel safe.

I know of several online business owners who raised their rates on the services they provide. What happened? For about one week it seemed they had made the wrong decision. Business all but stopped! However, after that "adjustment" period, floods of leads came rolling in. They never regretted it.

2. Customers View Higher Prices As A Status Symbol

Its true! Im sure youve met some people who love to brag about how much they paid for everything they own. Their car was custom ordered from the dealer and cost much more than any old car chosen from the showroom floor. Their clothes reflect this seasons latest trends and were purchased at full price from the expensive department store... NOT at an end-of-the-season clearance sale. I could go on and on.

The point is, many customers simply will not buy a product or service at a discount price regardless of how good the quality is. They have the "ability" to afford higher prices and are proud of that fact.

3. Many Believe Expensive Products Are Image Boosters

I actually heard this conversation in a department store once.

Woman One: "Look at this blouse! Isnt it wonderful?"

Woman Two: "Its OK, I guess."

Woman One: "But its an Adrian Bloom blouse! Im going to buy it and make all my friends jealous."

Woman Two: "Who is Adrian Bloom?"

Woman One: "I have no idea, but this blouse costs twice as much as that Liz Claiborne one so it must be the next big thing!"

Can you believe it? The woman had no idea who the designer was, but based on price, she decided it would enhance her image so she bought it.

The same is true of Internet shoppers looking for products or services. Those who believe being associated in some way with higher-priced businesses are more willing to spend money because they feel it will enhance their images.

The psychology of pricing is a complicated subject, and Ill be the first to admit that raising rates will not work for everybody. Before you raise your rates, consider the following:

1. Can you offer something better or different than your competition?

2. Will the rest of your business support the "branding" of a higher price? (i.e., Do you have a very professional-looking site, excellent service, and other elements that those who pay higher prices expect?)

3. Will the new pricing structure allow you to make as much, or more, money by selling fewer items at a higher price rather than many items at a lower price?

It just might be that the reason your business is struggling is that youre charging too little. Give some serious thought to raising your rates. It just might be the best thing you ever did!

Copyright 2004 Diane Hughes * ProBizTips.com