Pricing your product or service is one of the most difficult steps in managing a business. Price too low, and you might find your customers asking you to stick to that price time and time again or worse still, start questioning the quality of what you’re selling. Price too high, and you’re unlikely to recover. In an nutshell – get it right- and the profits will flow in. Get it wrong – and your business is going to immediately suffer. So just what does it take to continually get the price right?
Kyle Clarke, Director at Start Grow Run says, “Consider whether you are running a high-turnover or high-margin business. Know exactly what it costs to provide a particular product or service – especially before you discount, and know your competition. Importantly, understand that an increase in sales does not necessarily equal an increase profits – some products / services are money makers… others are loss leaders.”
Knowing how to price according to supply and demand is essential. When you’re busy, you can afford to charge more – and when you’re not – let your client know that you’ve provided them with a special rate and secure the work at a price you’re comfortable with. Importantly, as you set your prices (or consider raising them), take stock of all the value factors that go into setting your price. What attributes of your product or service are noteworthy? Below are some examples of value factors that go into pricing a product or service:
For a product:
- Quality of the materials involved
- Performance of the finished product
- Packaging
- On-time delivery
- After-sales service
For a service:
- Experience level of the service provider
- Bottom-line impact of the final deliverable
- Appearance of the service provider
- Turnaround time on phone calls/emails
- Ability to meet deadlines
A businesses ability to demonstrate and deliver above and beyond what competitors demonstrate and deliver, will directly impacts the prices you set…and get. If you promise certain factors, yet fall short on delivering them, your price will be challenged through customer complaints, delayed payments or customer defections. For more information on pricing, business growth or financial management, get in touch with Start Grow Run today.
