Have you ever been stuck in a situation where you are unsure of whether your pricing is too high or too low?
It can be very tricky to get your pricing right because there are a number of variables for you to consider. This includes your competitors, your market or the external environment surrounding your business, your costs and of course, your customers.
1) Your competitors.
You want to be able to have a look at your competitors. See what they are charging. However, be careful not to get too obsessed with your competitors because you could potentially take your attention off your business. It is important to always be aware of where your business sits.
2) Consider your market or your business’ external environment.
What is happening in the market in general? What is happening in the economy? Is your pricing too high or perhaps too low? Be knowledgeable about the external environment surrounding your business so that it can help you determine where to price your products and services.
3) Your costs.
Where are your costs at? Do you have a good handle on your costs? What are all the variable and the fixed-cost components involved in the products or services that you are selling? When you have an awareness of all your costs, you can determine whether your pricing is right. Are you charging enough to make the profit that you need to, or are you charging too little which means you never seem to get ahead for all the hard work you are putting in.
4) Think about your customers when setting your pricing.
What is the pricing your customers can bear? Surprisingly enough, they often can bear more than you actually think. Business owners are normally more afraid about putting their prices up than their customers are. There is an old myth that if you put your prices up, you will lose all your customers. Myth debunked – that is certainly not true!
You might discover that when you look at your competitors or your costs, you essentially need to put your price up.
Bear this in mind – if your gross margin is 30%, and you put your prices up 10%, you can afford to lose 25% of your customers and you will still be making the same money. This is a mathematical equation based on a matrix which can be provided to you at Biznostics. Of course, it does depend on your margins.
So, when you have a look at all the above-mentioned factors, it is important to put some time to research about them so that you are more confident in pricing your product or service.
The key here is to ensure that your pricing is right for your business by carefully considering all these factors. This is so that you make the money that you need to help your business be successful.