Are Your Prices Right?
Deciding on what price to set for company products and services is probably one of the hardest decisions business owners face, especially in this economic climate. Here's some ways to help you determine the right pricing.
DETERMINE THE COST OF PRODUCTION
Knowing the direct and in-direct cost allocated to produce the product or service will help to decide the "break-even point." Direct costs may include wages, salaries, materials, incoming freight, etc. Divide the direct-cost dollars by the total number of products/services produced for that specific accounting period. Indirect costs may include general and administrative fees that can’t be specifically applied to the product and/or service for that specific accounting period. Add both direct and indirect cost and that will equal your "break-even point."
KNOW YOUR COMPETITION
Know who your competition is and what their price points are. Compare your products and/or services to your competitors. What’s the value of their products in comparison to yours? Find out why people buy their products/services. Ask buyers what they like most about their product, and what they like least about it.
DECIDE ON YOUR PRICE NICHE
Do you want your products and/or services to meet the competition, penetrate the market, or be priced at a premium rate? What’s the difference? Here’s the breakdown:
Premium pricing: These are prices set higher than the competition or higher than within the industry for that product and/or service. High prices suggest quality and distinction to some customers.
Market Penetration: This pricing strategy is designed to dominate the market share. Most companies use this strategy to gain name recognition and also used by start-ups to under-cut competition and gain frugal buyers.
Meeting Competition: This strategy encourages buyers compare the prices (and value) of your company’s products and/or services to other businesses.
In order to capture your market niche, you must always be aware of the market conditions as they change.
Learning how to price your products and/or services can help you decide on the appropriate marketing strategy for your niche of which can increase sales and grow you business.
About the Author: Priscilla Walker is the president and CEO of Your Dependable VA, Inc., a virtual assistance company. Your Dependable VA provides professional office assistance to small businesses. We offer business support so that business owners can free up their time and energy to focus on running their company without getting burned out.
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