Your pricing strategy will define how a success your business will be. Price your products correctly and your business will prosper.
Get your pricing strategy wrong (over-price or under-price) and your business will go down before you even realize. The key is in how to find the right price points.
When it comes down to doing business, there are a variety of different types of pricing strategies. However, there’s no fool-proof strategy that fits all types of products, businesses, or markets.
A good pricing strategy involves considering certain key factors such as who is your target customer, how much your competitors are charging for the same product, and understanding the relationship between the quality of your products and the price you charge. Fortunately, you have a great deal in how you price your product.
Let’s have a look at how to correctly price your product.
Get Clear About Making Money
The first step towards deciding the pricing strategy is to get clear about what you want to achieve with it: whether you want to make huge profits from the start or just want to make a reliable profit and brand name at the start.
Making money means generating enough revenue by selling your products so that it can cover your costs and leaves you enough money for yourself.
Remember, price alone cannot drive sales. Your ability to sell is the factor that influences how many products you will sell which includes hiring the right salespeople and adopting the right sales strategy.
Let’s understand the different types of pricing strategies.
Pricing your products too low can affect your business negatively, even though business owners often believe this is what they ought to do when the market is down.
Remember that consumers want to feel that the products they are buying are worth their money, no matter how low they spend buying it and most of them won’t purchase from a seller they believe to offer less value.
As a businessman, you also need to be careful that you are fully covering the costs when pricing products. Reducing prices to the point where you are giving away the product at your cost will not be beneficial in the long run.
On the other side, overpricing a product can just deter away your buyers to your competitors since the buyer is always going to check how much your competitors charge. Charging more than the customer is willing to pay can also decrease sales.
If you think that you have to cover all the expenses of people who work for you and charge high for that you charge too much then you’re definitely going to lose sales.
Put yourself in the customer’s shoes when pricing your products. What you be willing to pay for the product? The key to finding the right price for every product is finding the balance between overpricing and underpricing. The day you find a perfect balance between the two is the day you will see your sales skyrocketing.
Other Factors to Consider when Deciding the Price for Your Products
There are a lot of factors you should consider when deciding the correct price for your product.
Know your Customers: Who are you targeting? Is it men or women or both? What age you’re targeting? Are your products the best fit for Millennials or older people? How much they are willing to pay? These types of things will help you understand how the budget sensitive each group is and price your products accordingly.
Know your Costs: How much the product costs you? How much the whole operation costs you (rent, transport charges, etc.)? You’re doing business for profits right? And, for that, you need the price to cover your cost.
Know your Revenue Target: You must have a revenue target for how much profit you want to make at a specific time.
Know your Competition: Who is your biggest competition? How much they charge for the same product?
The above-mentioned tips can help you decide the right pricing strategy for your business. One of the most important things to remember is knowing what your customers are willing to pay. Also, don’t forget to maintain the perfect balance between overpricing and underpricing.