The Pricing of Your Products: What You Can’t Afford To Forget

There is no one right answer when it comes down to determining the price of your product/service. What works for one company may not work for another in the same industry. A Google search for “pricing products”, which returns 297,000,000 results, is almost twice as many than a Google search for “writing a plan” – a business process that has a formula and can be learned.

Pricing products correctly requires a lot of art and comparison. This requires a good understanding of the market and the ability to see the future.

There is no standard price for pricing. Instead of creating your own list, you‘ll get more value from considering the implications of your choice and how it will impact your ability to attract your target audience.

Your Starting Price Defines You

Ed Catmull admits that pricing is a complicated question and there is no easy answer. Instead, think about the larger questions: How can you satisfy your customers’ expectations? What will you do to invest in the product’s further development? You can figure the best price for your product by asking questions that consider the “bigger picture”.

Mistake 1: Thinking That It Is Best to Be the Lowest Priced Provider

This strategy may be a good fit for undifferentiated businesses, but strategies that focus on the lowest price often require large initial investments and extensive implementation.

Mistake 2: Not Realising That Your Price Is Also Your Marketing Message

How do you want the outside world and others to perceive your product? If your price is too low, chances are that people will not like your product or you will attract a different audience. Your pricing communicates a message. It’s your positioning. Before you decide on a price, make sure to consider this.

Mistake 3: Underestimating Your Actual-Life Costs

It is not a good idea to price your products solely on the basis of your gross margin analysis. Also, you need to take into account overheads such as payroll, rent, marketing expenses, insurance, hardware, software, telephone installation, new carpets and any other routine costs. These costs can be a problem if you do not take them into consideration when pricing.

How Your Price Impacts Your Business Operations

Pricing your product too low can send the wrong message sometimes. This could compromise your morals or your mission.

What’s the solution? What does your product stand for? Or what would you like it to say about your company?

If you are trying to sort out a budget for your business but don’t know where to start, take a look at: Positive and Negative Budgeting Tips to Look Out for in 2023

Multiple Products Can Have Different Prices Which Could Impact Sales

Pricing multiple products can be dangerous. The Yale School of Management published a study in 2012 that showed that consumers are less likely to purchase products with similar prices than products with minor price differences. The study revealed that only 46 percent of participants purchased gum when they were offered the choice to purchase two brands at the same price. However, participants who were given the option to buy two different brands of gum at the same price spent 77 percent on a pack.

You don’t have to price each product differently. However, you might want to consider this when you have products that are very similar. If you do it right, you can save sales and even increase them.

Take a Look at the Bigger Picture

This list should encourage you to think beyond just about recouping your product costs. Pricing is critical to your brand and the future success of your business/company. Take the time to get it correct, but remember to look at the bigger picture. Pricing your product does not answer the important questions that will guide your business. How will you add value to your customers? How can you grow into the future? How can you adapt to the competition?

Take a look at our most recent blog: Is It a Good Idea to Start a Business With Friends? Do’s and Don’ts

ActionCOACH can help you develop and grow your business through a wide variety of services, from business coaching and mentoring to sales training and marketing assistance. No matter what stage your business is in, our team of experienced coaches can help you take it to the next level.

If you’re serious about finding the perfect prices for your products or services, ActionCOACH is the perfect partner to help you get there.

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