The ultimate objectives of any business are expansion and profits. To achieve both, you’ll likely try to sell your products for the best price possible. Pricing strategies mean the methods you use to work out the perfect price for your products and services so that you can cover the cost of producing and delivering them. In addition, you need to make sure that you’re providing enough value for money to your customers so that they keep coming back to buy from you. Here are a few of the most important factors to bear in mind when working out the ideal price.
Assess Your Costs Carefully
Take care to carefully analyze the total costs of producing the goods and services. Many entrepreneurs make the mistake of not factoring in every little expense they incur and end up selling the products at prices that don’t cover them. Eventually, they end up running in losses. Factor in expenses like the cost of the raw materials you buy and the salaries and benefits you pay your employees. Add up each overhead cost in detail. For instance, transportation costs and the charges you pay for marketing and advertising. If you’re working out of rented premises, include the rent you pay and the insurance coverage. Taxes, costs of repairs, and other maintenance expenses are other extras you must keep in mind.
Assess Your Competition
A smart entrepreneur knows that to remain in the market; she must use pricing strategies that make sense to the customer. Before buying a particular product, every potential buyer scouts the market and compares prices and value before making the final choice. Check if you offer some added value that the others don’t. Assess the quality of your products against theirs. You could also factor in the add-ons you provide and the exceptional customer and after-sales services you have in place. Consider the location you operate out of. An easily accessible workplace can be a huge advantage. Every edge you have over the competition allows you to charge higher prices.
Assess Your Target Audience
Evaluate the tier of the customers you’re targeting. You could be offering a product that spells exclusivity. Accordingly, even if the prices are high, you’ll still find a niche audience willing to spend more money. Sometimes the price of a product can differentiate it from competing products that may seem mediocre. However, if you’re targeting a lower tier of customers, they are likely to move on to cheaper products if your prices become too high. Check if customers can find reasonable alternatives in the market. If they can, you might want to rethink your pricing strategies.
Assess the Base Price
Find the optimum balance between the very basic price tag you can put on your products and the highest price you think your customers would be open to paying. Once the client chooses your product, you can always make profits out of the add-ons and peripherals he must buy eventually. For instance, you could be selling a printer. Offer packages that include added ink cartridges, toners, and perhaps, regular servicing for an extra charge. You can maximize your profits by way of these additional offers.
Assess Your Goals
When structuring your pricing strategies, keep the future goals of your business in mind. If your goal is to capture the biggest markets possible and make profits out of the volumes of sales, you can consider keeping the prices competitive. But, if you intend to cater to a particular niche of customers, you can choose to price your products and services accordingly. At the same time, you need to be confident that by catering to this small volume of customers, you can continue to make adequate sales and stay in business.
Assess the Sales Figures
Evaluate the sales figures each month. You might find that the pricing strategy you’re using appeals to only a limited percentage of customers. And, by lowering prices, you can raise the volume of sales. In such situations, choose a pricing structure that is flexible and more in tune with the requirements of your customers. Focus on the total profits you make at the end of the month. You could also consider the cash flow you need. If you need the finances, you could choose to lower prices and liquidate your products quickly.
Assess the Industry You Work In
Pricing of goods can vary from industry to industry. For instance, high tech, electronics, gadgets, and automobile industries typically sell expensive products. Accordingly, you’ll set prices that match the market for these commodities. But, if you’re dealing in essential, non-durable consumer goods like food and beverages, you’ll assess the value you provide to your customers when finding the right pricing strategies.
Many entrepreneurs talk about how they inadvertently price their goods and services at low rates and don’t make enough profits to sustain their companies in the end. However, if you have great pricing strategies in place, you can make a success of your business and attain the expansion goals you have in mind.