Are you tired of not making enough money? By pricing your products and services correctly, you can enjoy the level of income your business deserves. So, how do you decide on the right prices?
When it comes to pricing your offer, there are so many things to consider before you make your decision. This is why so many business owners make mistakes in this area.
How to Price Your Product or Service
There are two common errors made by businesses when it comes to pricing: they either undervalue or overestimate their products or services.
Some will take the conservative approach to undercut their competitors in the hope of generating a higher volume of sales. Others think that premium pricing always implies high-end value, and they’ll then try to bait customers with an expensive offer.
But to get the most out of your offer, it’s important to price it correctly. Otherwise, this could result in negative customer reviews that might damage your credibility.
Here are seven tips to ensure you always end up with the right price:
Tip #1 – Identify the Right Pricing Scheme
There are two standard pricing models:
- Cost-plus pricing
- Value-based pricing
The cost-plus model adds a markup to the cost. In contrast, the value-based scheme takes into account the value that customers place on the offer.
Depending on your business and niche, one of the two may offer a significant advantage. What’s important is to pick one pricing scheme and then stick with it to avoid any confusion.
Tip #2 – Learn Everything About Your Market
Some business owners simply try to match their prices with the hope that it will be enough. But you have to learn everything about your marketplace if you want to price your offer correctly.
Find out what your direct competitors are charging. Look at the price ranges customers are comfortable with. Make a note of how much they are willing to pay for premium services or added benefits.
Tip #3 – Calculate Your Costs
Whatever the pricing scheme, your costs always matter. Don’t forget that your direct costs may include development costs. Variable costs for supplies, packaging, and marketing could also affect your pricing.
Tip #4 – Take Taxes Into Account
Look at what you offer and how you deliver your goods or services. Are they subject to VAT?
If you are VAT-registered, then you might have to re-evaluate your margins. You might not be able to charge the same amount across all countries and territories. If this is the case, you must adjust your pricing strategy accordingly.
Tip #5 – Familiarise Yourself with the Current Environment and Future Shifts
Again, this comes down to understanding your marketplace.
You may have one price in mind for a particular product or service. But what if the market changes or has moved in a new direction?
You might have to change your price so you can meet new customer demands.
Tip #6 – Work in Your Upgrades
Many businesses offer standard and premium packages. So, how do you price your own packages correctly in this case?
Once again, you’ll need to work out either the costs or value of each upgrade.
It’s also common practice to offer discounts on larger packages. You’ll need to work out whether this is something you can offer comfortably to avoid an unacceptable impact on profit margins.
Tip #7 – Consider the State of Your Business
Another way to approach pricing is from a business position point of view.
For example, your overall offering may warrant an increase if you’re in a good place to expand and grow your business.
Remember, that your pricing doesn’t just affect your revenue. In the long run, it will also affect everything else in your business, including its viability and scalability.
You don’t have to compromise just to undercut the competition or to make short-term sales.
Conclusion
As you can see, there’s no single approach to pricing. Every business is different, and every customer segment will have their own specific expectations.
However, by following our tips, you can develop a more compelling pricing strategy for your products and services that works for both you and your customers.
At Halo Training Solutions, we can train your team so they have the knowledge and skills to implement suitable prices for your products or services. Whether you need to increase your sales or adjust your current pricing strategy, our training can be tailored to your needs.
Get in contact today to learn more about how we can support your business with financial training or to discuss partnership opportunities.
