Price setting is complex: as important as market awareness, product development or advertising. You could do all these brilliantly and then undo it all on pricing.
How do you know how much to charge?
You must be careful not to underprice, and reduce profits, or to overprice and risk losing customers.
It needs care and regular review, but also a keen sense that customers don’t buy on price alone. Don’t fall into the trap of thinking that prices have to be the lowest in the market to attract customers. Astute customers may choose suppliers for reliability.
Other factors which influence the buying decision include:
- Quality
- Technical and backup services
- Reputation
- Brand associations
- Location
- Guarantees
- Refund Policy
Businesses in the marketplace may charge 5%, 10% and 20% higher than their competitors, yet still, run very profitably. Those charging higher prices may be the most successful because they excel in other areas which affect the customer’s choice.
Know your customers and understand the reasons they choose to buy from you and not someone else. This is invaluable in working out your pricing strategy.
Consider other factors, too. Have a sound grasp of what it costs you to operate your business and what it costs to make a sale. Ask yourself fundamental questions on profitability. Know your net profit targets for the year. What are your competitors doing? The more information you have, the more likely you are to get the price right for your business as well as the customer.
Ask us for ideas about your pricing strategy.
