Pricing a business’s products or services can be a difficult task, even for the most experienced business person. This is because the price a business charges its customers can have a direct effect on the success of the business, no matter the type of product or service being sold.
Getting your pricing right can enhance sales, ensure profit and increase customer retention rates. Getting it wrong can create a number of problems for a business that can be hard to overcome – even in the long run.
Pricing of products and services needs to take a whole range of factors into consideration. Many small businesses typically approach setting a price by considering the cost of the goods plus a percentage, establishing what customers are prepared to pay and keeping an eye on competitor pricing.
Here are three things to consider when establishing the right price for your business:
– Know your costs. Work out how much it costs the business to provide a product or service. This includes costs of delivery, total overheads, sales and marketing expenses.
– Determine how much your target market will pay for the product or service. Market research is often a good resource to find out how much customers are prepared to pay for things.
– Know what your competition is charging. It is highly likely that your target market will also be comparing the competition’s price to your own. Consider whether your product or service offers more or less value – if so you may be able to charge more or may have to charge less.