As a business owner, you may struggle at some point with how to price your products or services. Price your product correctly and create an abundantly prosperous business. Get your pricing wrong and you might just create problems you simply cannot overcome.
There are a variety of different kinds of pricing strategies. There are also a variety of reasons why a company may price a product or service at a ridiculously low or high prices; but, on average, you want to price your products or services so that you make a profit for your business.
An ideal business model will include a range of products and services as well as pricing to give your preferred clients/customers a choice. Today’s educated consumers like choices.
The good news is you have a high degree of flexibility in setting your prices. That can also be the bad news because you may get stuck on where to price it.
Consider these factors when pricing your business products or services:
1. Know your Sales Flow.
It’s necessary to know how each product and service flows into one another. Without it, it is nearly impossible to determine an effective and comprehensive pricing strategy.
One of my clients offered an array of products and services. The problem was that she didn’t have a structure that made it clear to her clients the most optimal way to work with her. She also didn’t have a crystal clear way to move her clients through those products and services. Once we mapped out her sales flow and structured distinct packages, it became clear to her and clear to her clients the options that were available to them. By defining her sales flow and her packages, she retained her clients longer and served them at a higher level.
2. Consider Your Hard Costs.
When pricing your products or services, factor in hard costs, including:
Credit card processing fees
Cost of materials
Postage and handling
3. Remember Your Hidden Costs.
Factor in hidden costs when pricing products or services. If your clients purchase your products in installments or after 30 days, then charge a premium price for those options. If they paid you in full, you could have invested that money and earned an interest. Since they pay you in installments, you need to charge that premium to recoup your hidden costs.
4. Test Your Market.
Know the marketability of your product to identify its demand. Test it first with your closest clients. Offer a free trial in exchange for their feedback. See if they will also provide early testimonials for your product or services to be used in early promotion of the product. As your product or services grow in demand, you can slowly increase its price.
You may also want your product to be known for its quality, especially when it has a proven methodology or results. In those cases, you will want to price your product higher to reflect its quality.
When setting pricing options, remember to listen to your customers and have a budget in place. You owe it to yourself as well as your business to manage your product pricing.