Here’s how to set your pricing so your business doesn’t go under!

Here’s how to set your pricing so your business doesn’t go under!

Pricing is one of the FOUR P’s of the marketing mix. The others are place, product and promotion. If any of these elements are not right, your business could be at risk of going under.

The key factor to pricing your products is: Low price = High Volume Low Margins, High Price = Low Volumes High Margins

Here are some tips to help you price your product and services right…

1. Don’t lower your prices when the market turns: Remember, people perceive value in products and services. If you discount them too much, you’ll be doing yourself a disservice, clients will perceive less value, even in a down-market. Instead create value around your product which justifies the higher price. For example, add a special gift with it, extend the warranty or offer a money-back guarantee.
2. Avoid price wars: Undercutting your competitors will get you nowhere. Soon you won’t be able to afford another drop in price and you won’t be making any profit to be able to add any value to your product or service.
3. Do your research: Just as under-pricing your products or services is bad, so is over-pricing them. With the Internet at your client’s disposal, it’s very easy to compare price and value very quickly. Do your research and price your product or service relative to your competition.
4. Know your customer: If you’re targeting a lower LSM, you can’t price your product too high. Aspirational consumers are willing to pay more if the product or service has the potential to improve their lives. Convenience generally comes with a premium for those that can afford it.
5. Understand your costs: You must intricately know what a product costs you to produce, store and sell. Factor all direct costs in but also understand how much to factor in for each indirect cost, for example, Customer services/call centre, rent, water and lights, salaries and the like. They all play a role in getting the product to the customer.

One last thing to bear in mind for new products is to test your pricing and your offers before you think a product isn’t working. Price isn’t everything but it’s certainly one of the most important elements in your marketing mix.