Introduction

Price is a significant determinant when it comes to the success of any business. The price tag you place upon the “innocent” face of your products or services will have a significant impact on their worth. Go too low, and people will think your products are inferior. Charge too high, well—while some prospects will immediately attach value to the products or services; unfortunately, some existing customers (on a tight budget) may “abandon ship.” Such is the problematic and yet important concept of price to a business that wants to succeed.

As critical as the issue of price seems in the general business world, many small businesses in America are yet to get a hold of this. The worst sets are black businesses run by black entrepreneurs who lack business sense and etiquette. Permit us to be succinct here for a minute! While there are excellent black businesses out there, there are still a few black businesses run either by a black businessman or a black businesswoman who simply does not know how to run a business. We can point to many reasons why, but you can also tell that they don’t know how to run a business, when you look at their price tags.

Black Entrepreneurs—Their Own Worst Enemy

A local black business operated by a black professional who charges as a beggar has already played themselves in his/her business. The reason is that such a black businessman/businesswoman in the course of his/her black business doesn’t understand the notion of “Perceivable Value.” We will come to that shortly, but before then, we’ll tell you this; until you learn to educate yourself and understand how people think and judge products/services by their prices, you will never see a reason to charge more.

Let’s get straight to the 3 reasons why black business owners need to not only charge more, but charge better.

3 Reasons Why Black Entrepreneurs Should Charge More

• Scarcity

Generally, scarcity refers to the resources we value but which exist in limited supply, so they are scarce. The concept of scarcity as an economic theory presupposes that, when people are confronted with scarcity, they have to make a choice. In fact, the one of the concepts of economics is to study and understand how people make choices under conditions of scarcity. This brings us to another concept, “scarcity marketing” as it relates to price mechanism in operating a business.

What Is Scarcity Marketing?

Scarcity marketing is about being exclusive with your goods by creating a sense of urgency around it. Since consumers place higher values on goods that are scarce, or just perceived to be scarce, decreasing the volume of your products available for sale will create a sense of urgency among customers and reduce the number of prospects who would have “gone home to think properly about it.”

Majority of people that visit a black business tend to procrastinate and will try to create one or more reasons not to buy. In fact, 73 percent of the people that will visit your local black business or online store are unlikely to make an immediate decision to buy. But when you introduce your product on time shortage offers, your customers and prospects will be less likely to delay their buying decisions further. And one sure-fire way you can make this work is to charge higher on such products.

Charging more while using scarcity marketing is a two-edged sword. It will not only arouse in your customers and prospects that innate sense of perceivable value on your goods, but it will also create in them that “fear of missing out.”

In a nutshell, using scarcity marketing and such other proper marketing techniques while charging a bit more for what you are offering could be a good way for black entrepreneurs to attract high-end clients and reliable consumers.

• For Perceivable Value

Another essential reason why all black professionals operating local black businesses need to charge more for what they do or sell is down to the notion of perceived or perceivable value.

Typically, most customers are not aware of the factors inherent in pricing service or product. The majority of customers that buys goods and services rely on the surface and emotional appeal of such goods or services, including their evaluations of the good things they believe they will gain from them.

Thus, perceived value refers to the merits or worth consumers place on a product or service.

Now, this is where it gets interesting. The value consumers perceived and placed on goods or services automatically translate into the price they are willing to pay for such goods or services. The value customers ascribed to a product or services is based on their analysis of the product or service’s ability to provide satisfaction and fulfill their needs. So, since people usually think that higher price means higher quality, customers with such a mindset (especially those who are not on a budget) will most likely hesitate or refuse outrightly to buy a product/services that appears too cheap. That is the nature of consumers, and that is why every black businessman and black businesswoman need to charge more (no matter how small) above the regular price.

Let’s face it. Two stores are selling a grill mat, which you’re out to buy. Store A is selling their grill mat for $17 while Store B has a $25 price tag on the same grill mat. Be honest, which of these grill mats will your analytical mind tempt you to buy? You probably would want to go for the one with the $25 price tag (even if you’re under a tight budget) because people naturally feel that goods with higher price have better quality compared to similar goods with lower prices. That’s perceivable value in action, and it’s one of the reasons why you need to charge more!        

Black entrepreneurs must see to it that they shape and increase their customer’s perceived value in respect of the goods and services they sell. All black businesses can achieve this by thoroughly committing to performing other perceivable utility value such as:

• Enhancing the form or physical design and appearance of the product or service in a manner that appeals to the customer (packaging—Form utility).
• User-friendly, efficient, and down-to-earth customer and delivery service (task utility value)
• Timely operation/delivery (a 24-hour locksmith service versus a 9-5 locksmith services –Time utility)
• The convenience of location. For example, a neighborhood grocery store compared to one that is 30 miles away (place utility)
• Ease of Purchase.

With all these in place and prices higher, black businesses can compete favorably with other businesses while contributing to reducing the racial wealth gap in the U.S.—a field where black people lag behind whites, Asians and Latinos in almost every area of economic and social wealth. Yes, we think it can be done. These were the perceivable utility values that drove black businesses and created so much black wealth (like Black Wall Street) in the 1920s as such that, many white people became envious and outright jealous of black businesses and their black empowerment, leading to the massacre of many black people and their businesses in Tulsa, Greenwood, Oklahoma.

If black people were able to create such value back then, they can do it again and even better in this modern era.

• For Low Wealth

As stated earlier, black people in the US are virtually behind whites, Asians and Latinos in ALL areas of economic wealth. For example, a recent study conducted on U.S. trends in wealth-holdings shows that whites have the highest level of family wealth in both medians and mean scale, totaling $171,600 and $933,700 respectively. Hispanic has $20,700 and $191, 200 median and mean net-worth, while blacks have $17,600 and $138,200 respectively.

One of the reasons why the U.S. racial wealth gap impacts more negatively on black people is down to black business failure rate (among other things), something which is showing little or no sign of turning around. The majority of black businesses today fail or record very little wealth not because, people don’t want to patronize black entrepreneurs, neither there are shortages of black businesses and educated black professionals; but because black businesses fail to impress on the customer and prospects that sense of urgency and perceivable value towards their products/services.   

The low wealth in black society in America is hurting deeply, as such that, it has created within some black folks a warped sense of inferiority complex. While black people must always believe in themselves as it were in Tulsa in 1921, they need to start from somewhere quick. Economic wealth comes from businesses, and businesses survive only when they are competitive with the quality of their products or services by satisfying the customer’s innate sense of scarcity, perceivable value, urgency, and fear of missing out. Once these factors are in play, blacks need to charge more in order to attain any meaningful wealth and bridge the wide gap between whites, blacks, Asians and Latinos.

The wealth gap can further be reduced if the black elite assist in the issue of black empowerment such as gaining access to credit and encouraging sound financial education and application of well thought-out business growth ideas and marketing strategies.

Black business owners will also need to stop entertaining black consumers who expect a discount simply because they have melanin too. If black consumers can go into non-black businesses and pay full price, then they are expected to do so when they go to the black business. There is a need to create more wealth and reduce the low wealth status of black people, and one way this can happen is if black businesses charge more. When we say charge more, we don’t mean to charge ridiculously high and unreasonable prices. We really mean charging what your product and/or services are actually worth.

Final Thought

All humans are born equal when it comes to the creation of wealth. However, it is the class that knows how to go about creating such wealth that would hold it above every other. If black people must create additional wealth, then black business owners need to charge better according to the reasons discussed above.