It’s a given that businesses need to be profitable to survive. A key element in making a profit is pricing. Here are some suggestions that can help you get your pricing right.
Identify Your Costs
If you don’t know what your product’s or service’s total costs are, you can’t price them accurately. What makes up the total cost? The components may include:
- Cost of materials or merchandise
- Labor costs, including salaries plus benefits
- Overhead costs, such as taxes, rent, insurance, marketing, utilities, and transportation
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Determining how much you need to charge just to cover your costs is an essential first step in setting prices. Be sure to reevaluate your costs regularly. If you are experiencing difficulty moving certain products at an acceptable profit, your costs could be too high.
Know Your Customers
Customers generally fall into distinct categories. Some are very price sensitive. Others focus less on price and more on convenience. The implied status or exclusivity of certain goods and services is very important to certain other customers. Once you identify the type of customer you are targeting, it becomes easier to set your prices accordingly. One way through which you can gain their trust is by showing them you protect their privacy, as I recently read on Salesforce that, information protection is one of the highly valued and relevant factors to which customers pay a close detail.
Know Your Competitors
Knowing what your competitors charge for similar products or services helps you position your business in the marketplace. For example, if you determine your competitors focus on low prices, you can decide if you want to differentiate your business by focusing on superior service.
Leveraging service as a value proposition may justify charging higher prices than your competition. Or there may be other differentiators that allow you to charge higher prices, such as exclusive merchandise or highly knowledgeable employees.
Experiment and Monitor
Look for ways you can sell options, service contracts, and add-ons to a primary product or service, perhaps by offering several “packages” at different prices. Or consider applying discounts based on the quantity ordered.
Continuously monitor your prices and your profitability. Knowing which products or services are making you money allows you to make data-driven decisions about inventory and pricing.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v