Summary: Do you have a difficult time figuring out how to price your products and services? A lot of entrepreneurs find price setting challenging.
In this article we explain how to get your pricing right from an entrepreneurial perspective.
Step 1: Don’t price out of desperation.
A lot of entrepreneurs move towards discounting their offering, or charging less than what it is worth out of desperation to get through a month and pay all the bills.
Do not price out of desperation – your pricing should consider your competitors, your customers, your costs and your overall business model.
If your business is operating from a place of desperation for months on end, there is a good chance you need to revisit your business.
Step 2: Stop using imperfect information.
Many entrepreneurs tend to set their prices based on gut feelings or simply what they think they should charge.
Using imperfect information often leads to incorrect pricing.
Get as much information as possible before you determine your pricing.
This includes what your competitors are charging and why, what your customers’ perceptions of value are and a correct costing model.
Step 3: Start using value-based selling.
How much value are you actually offering in relation to your competitors?
And how is your offering positioned in the mind of the buyer?
Represent the value you are offering in very clear terms and present this value well. Many entrepreneurs under-represent the value they are offering and thus under-price.
The most lucrative pricing strategy is maximum price according to value, however you still need to take into account costing and competitor pricing which will in all likelihood bring the maximum pricing down, but its a good place to start.
Step 4: Take into account the value of having a well known brand as a client.
Landing a well-known brand or personality as a client can help convince new customers to come on board at a higher price.
To get a client of this stature in the beginning may require offering this particular customer a special rate.
Step 5: Consider bundled pricing.
Packaging your products and services into bundles and offering them at a reduced price can work, provided that the price is still high enough for you to make profit overall.
Step 6: Don’t let cost instability affect your pricing decisions.
Small to medium businesses are often faced with unpredictable costs.
Don’t let these unpredictable spikes in expenses influence your pricing, but rather look at your business over a steady projected period of time.