Setting your products or services at the right price is a significant factor in the overall health of your business. If you operate within a market where competition is heavy, offering customers the right price can be the difference between winning or losing sales.
On the one hand, you don't want to set prices so low that you can't afford to cover all your expenses despite good sales volume. On the other hand, if you set them too high, you’ll have a harder time selling at all.
You probably did a great deal of research into your market before starting your business, but you should always keep track of changes on an ongoing basis. Check out what your competitors are charging for similar offerings, and try to match them or beat them. If you can't beat them on price in a way that is economically feasible, think about how you can offer an advantage to your customers at a similar price point.
Sales and discounts
Perhaps you don't want to change your price on a permanent basis, but need a revenue jolt. Consider having a sale or offering discounts in the form of coupons or other promotions. This can be a great way to drum up extra business in a short amount of time, and some of that business may turn into repeat customers.
Could “freemium” work for you?
Could any of your offerings fit into a freemium model? This would be where your product or service is provided to the customer for free, but you charge for additional features or services. Software providers, for example, often utilize this model in order to encourage people to try their product and continue using it. It's certainly not right for everyone, but if it's a possibility, it's worth considering.
Have you ever tried price anchoring? This is a way of psychologically persuading customers to purchase one item by offering a different, more expensive option alongside it. Larry Alton at Small Business Trends1 discusses a couple of good examples of this, including Zoho CRM, which offers $12, $20, $35, and $100 per month plans of its software: "Zoho knows that the majority of customers aren’t going to pay for the 'Ultimate” plan at $100 per month,” he says. “However, including this outlier makes the $35 plan – which is what they want customers to lock into – seem like more of a value. The same thing can be done in a retail store. Placing a $200 handbag next to a $59 handbag makes the second one look like a good deal and increases the frequency of purchase."
Be worth the money
Perhaps the most important pricing consideration is to make sure your products/services are actually worth the price. Take your work seriously and offer the customer the best possible experience, because that translates into repeat business and word-of-mouth referrals. A great pricing strategy should go hand-in-hand with quality control and good customer service, both before and after the sale.
Pricing can be a difficult thing to get exactly right, but it's important that you do. Adjustments can be made, but if you do so too frequently, it can be a turnoff for customers who expect consistency. This, of course, assumes that your adjustments aren't downward every time, which customers would like, but which may not be the best option for your bottom line.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.