Determining your pricing do's and don'ts
In order to come up with competitive pricing, you will need to shop around. It is necessary to figure what you pay, what your profit needs to be, and what you can ask for in pricing. It will also be necessary to know what your competitors are offering and for what quality of service.
There are three things that will contribute primarily to the pricing involved with a product or service. This is what those determining factors are:
- The cost of what you pay to create the product or service you will be offering.
Here are some top do's and don'ts that should help you to determining your pricing in a way that will increase your sales volume necessary for your small businesses success.
Do's and Don'ts
Plan on hard data:
Plan and base your price decisions on hard data. It is important that a company understands that there are factors that drive their customers purchases. With this in mind, it is important to track the information and then decide on actions based on that firm information.
Develop a model:
Take the time to develop a model for data, which make it easier for rational pricing decisions.It is important to gather and analyze the data, in order to make informed decisions on pricing.
It is also a good idea to use a third party analysis to determine if the documentation and tracking being used is as accurate as possible.
Go with real facts, not gut feelings:
Whether it is from the sales people or upper management it is important to use statistics, tracking and hard numbers before you make any base decisions for pricing. The reason is that the pricing needs to be based from unbiased information.
What is your leverage?
There is an old saying that is "leverage is the iron law of pricing" This means that people will pay for different products, and services. The best way to find a good pricing is to know what the customers will be willing to pay. This way you know that you have leverage if you have the product they want, at a good price.
Segment your market:
It is a good idea to segment tag every customer, and market that you will be working with. This way it is easier to track every customer and prospect, therefore making analyzing easier to compare.
Don't aggregate your data at a level that is unrealistic or too high:
The main thing with the different types of customer groups, there will need to be substantial growth in customers for substantial growth in profit. It is important to be sure of your market, before you base pricing that will affect profit.
Determining your pricing with these do's and don'ts will make it easier for you to set your pricing off of hard data. Therefore creating a better foundation needed for your small business success.
Therefore the main thing is to, do get good data, make decisions from that data, and don't rely on whims or guesses.