Pricing your product or service accurately is an art and a science. Get it right and you will be able to pay yourself and your team well and earn a profit; get it wrong and you may find yourself struggling to survive. Creating a system to review your prices is a great way to stay up to date on market demand.
Price is affected by many factors. Ultimately, your price must cover your costs and earn a reasonable profit. To gain a good understanding of what prices to charge, you need to look closely at the market, starting with your own customers.
Price is a significant part of the buying decision. Once a consumer becomes aware of a problem or need they research, gather information—including price—, evaluate options, make the purchase, and then decide if that was a good decision or not.
Consumers will pay for what THEY value. When setting a price, the business owner must be aware of the customer’s perceived value of the product.
The starting point for price setting is determining your price objectives. What are the factors you are using to make this decision? Greater market share? A higher rate of return? Just wanting to make more money?
Intently review your prices
To set a marketable price that converts the customers you attract, consider the following questions.
- What research have you done to determine the price of your product?
- Are your prices higher or lower than your competition?
- Does your product offer a higher quality or better service than your competitors for a similar price? If yes, describe the differences you offer.
- What would happen if you raised your prices?
- Have you discussed prices with your customers? What feedback did you get?
- What reasons could you give your customers for a price increase?
- Could you sell a lot more if you lowered your prices? How would that impact profit?
- If you operate in different geographical locations, are your prices adjusted accordingly?
- What options do you have to bundle/unbundle your products to create different price points?
- Does your price cover all your costs, including a wage for yourself?
Until next time, Enjoy your Entrepreneurial Journey!
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