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Learn How to Price Effectively

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Learn How to Price Effectively

By bridgetwpollack, Guest Blogger
Published: September 18, 2013

One of the most important decisions you can make as a business owner, a marketer, an accountant and a business strategist is determining a price for your product or service. The price you choose to set communicates value, market position and customer expectations. From a backend perspective, it also determines the ever-important potential of profit.

If you’re working to develop the perfect pricing strategy for your new product or service or if are re-evaluating your current pricing strategy, take advantage of the free resources offered by SCORE.  SCORE exists to provide expertise that is crucial to helping small businesses make important decisions like pricing determination.

Resource 1: Pricing for Profit: Understanding Gross Profit, Margin & Markup

This online workshop, presented by SCORE mentor Larry Hunt, will set a strong foundation for your pricing knowledge. You’ll learn standard pricing techniques, the difference between markup and margin and how to calculate your gross profit. For existing products/services, this session will teach you how to identify the current stage of your offering’s lifecycle and how to optimally price in this phase.

Resource 2: Pricing Strategies for Small Business

In this article, Janet Attard, a frequent speaker and author on small business issues, addresses important pricing questions like, “What are some ways to find out what competitors are charging to develop your own pricing strategy?” and “When are discounts NOT a good start-up strategy?”

Resource 3: The Total Cost Picture

Are you fully aware of all the factors that should be taken into account in your pricing? SCORE mentor Ashesh Banerjea clearly and concisely lays out all the considerations in this blog post. Also check out Ashesh’s explanation of 5 pricing models.

Setting appropriate and competitive pricing and re-evaluating it on a regular basis are so critical to small business success. SCORE provides free online workshops, articles, templates and blog posts to educate small business owners on this and all business topics. And SCORE mentors provide free one-on-one business mentoring for any issue you are facing in your business. Harness the knowledge of business experts to your best advantage. Connect with a free SCORE mentor today.

About the Author:

Bridget Weston Pollack

Guest Blogger

Bridget Weston Pollack is the Vice President of Marketing and Communications at the SCORE Association. She is responsible for all branding, marketing, PR, and communication efforts. She focuses on implementing marketing plans and strategies to facilitate the growth of SCORE’s mentoring and trainings services. She collaborates with SCORE volunteers and develops SCORE’s online marketing strategy.

Comments:

Pricing a product should always be balance. The business will earn but at the same time your customer can get it one a right price. I definitely agree on your tips.
These are very valuable resources. Pricing too high can prevent a product from capturing market share and pricing too low will sacrifice valuable profitability, which is the life-blood of any good company. Visit [This post was edited to remove a link. Please review our Community Best Practices (http://www.sba.gov/community) for more information about how best to participate in our online discussions.]
Pricing is definitely something every business owner struggles with. I remember when I first started out, I didn't understand pricing models. I basically just took the fixed cost and doubled it to get the price. I got lucky and starting moving some units but I really did not understand that I needed to price more on supply and demand than on the costs internal to the business.
Review pricing two to four times a year, and at any other time when you see a change in your own costs. You want to spot problems (e.g., cost increases) early on and make appropriate adjustments to continue making a profit. You also need to stay on top of market trends; if prices and demand are rising or falling, you can determine how to stay competitive. Have a good business!
It is also great if you can determine how "stretchy" is your price. Look at it this way - sometimes you can increase the delivery price for more profit without hurting the clientele. I'm not talking about setting a price in relation to your competitors and the average price on the market. Price can be set by quality also (take Apple for example).
This is one of the most incredible blogs Ive read in a very long time. The amount of information in here is stunning, like you practically wrote the book on the subject. Your blog is great for anyone who wants to understand this subject more. Great stuff; please keep it up!
Well written. I know a few professionals that create info products for a living. One in particular, started his first product really cheap, at 7$ per download, and he got little results for it. It was suggested later to him to raise his price, and the "perceived" value of the item. He bumped it to 29.99$ and it sold like wild fire. Don't be afraid to give the market what it wants is my basic advice, and don't forget to test test test!
I agree. It's important to be confident in the quality and demand a fair price. But price is also a competitive factor, very determinant for the buyer. So we often try to be as price competitive as we can.
Pricing strategy totally depends upon the backend perspective. Since its a essential part to fix a price basis on current trend & requirement of the market.
pricing plays an important key in business strategy. if you give out the price too low or two high, it will take impact on your running business first. Need to take into serious consideration when pricing and require much effort to obtain information about market.

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