It is the age-old question, how do you price your products to make sure that you have a healthy profit, that you’re getting paid for your time, that you’re not outpricing your audience, and that you see loyalty from your customers.
If you ask too much, then you might find yourself selling few and far between; if you ask too little, your profit margin will be very slight – and you need to work out if your business can even continue with that price.
Here are a few ways you can price your product.
Market
One of the most important things when it comes to pricing is that you have considered the market. Your audience will have a very clear breakdown of what they do, where they shop, and what they can afford to spend. You need to consider that when you do your pricing.
It can be tempting to look at competitors and try to outdo them and be as cheap as possible. But the problem with that is your competitors have probably done the research too and have priced themselves accordingly.
You can be ultra-smart and ask your market directly what they would like to spend to get your product, this is called a Gabor Granger, and it is a survey technique that can help you find the optimal pricing for your product.
Pricing strategy
What is it that you want your pricing to achieve? Some new brands want to appear exclusive, and for the wealthy, their prices might not be on the website.
This is an indication that the prices are pretty high and it is not a product for everybody.
You might be choosing to go into the market with a relatively low price to entice new buyers. This isn’t a terrible idea, but once the price goes up to its regular amount, you might find that you take a drop in sales.
One way to avoid losing many customers when you adjust your pricing is to make sure that they realise that this is an introductory offer.
Value
If you don’t sell products, instead you sell services; you will have to pay close attention to what you think your time is worth. In this case, it can be even more challenging to set a price since you are your service.
There is lots of information online about how to price things like per word, design, should you charge per hour, or should you be charging for a complete project?
You need to work out what works for you in this case and only picture clients that you know can afford the services.
Other factors
Depending on which country you live in, you might need to charge a VAT or tax separately. You may also need to consider international shipping, and you will also need to factor in any adjustments due to fluctuations in the exchange rate.
If you are in a business that works on invoices, you will also need to develop a late payment structure. Make sure that you have considered your payment terms very carefully to ensure your cash flow is kept healthy.
And finally, one of the essential things when pricing your product or service is to be flexible. Once you know your costs and what the competitors are charging, you can remain agile.
Are you looking for ways to increase your small business income? Read this next: 5 Small Business Strategies That Can Make Extra Money