How To Price Your Products And Services
•Make sure you take into account all the costs for the product or service. For example, be clear how you will include overhead costs that may include electricity, administration, lease and marketing costs.
•A common mistake with running a small business is that the owners will not include a realistic rate for their time and effort. For instance, you need to establish a reasonable hourly rate that reflects your effort for the task being done. Charging a very low hourly rate so your product or service is cheap may get you market share but will it pay your bills?
•Understand your competition and what they offer. For example, they may offer a lower cost product because they sell in bulk or they may not offer local after sales service. By understanding your competitors you can also identify a point of difference that may assist you with your marketing. Our recent post on this subject will help you understand this in more detail.
•Where do you position your product in the market place? For example, if you are trying to provide a low cost product, make sure your prices are comparable to those of your competitors in that segment of the market. This may also influence the quality of the components used as there would be no point using expensive parts if the final product is targeted towards the lower end of the market and your total costs make you uncompetitive.
•What value do your products or services provide? It is critical to understand that cost may not be just the sole reason a person will buy your product or utilise your service as the value they are getting can be vital. Understand what the value is that is also aligned to your customers’ expectations. Therefore, as you consider each of the points above what value is being developed that may be relevant to the customer. Again, this can be a critical point of difference with how you position your products or services to not only maintain market share but to increase it.
Answering these questions may help you identify improvements in how you provide your products and services which can result in you running your business more efficiently.