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What to Consider Before You Price Your Products

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What to Consider Before You Price Your Products

By bridgetwpollack, Guest Blogger
Published: January 7, 2016 Updated: January 7, 2016

Pricing your products as you launch your small business? It may be worth taking a second look at your pricing strategy.

Sure, you could count your material costs and base your price on that alone, leaving yourself a small profit margin. But have you included the cost of your time and labor? How about transportation, shipping, and taxes?

A holistic approach is necessary to ensure the long-term viability of your business. Failure to consider the full scope of your pricing needs could mean smaller profits, a customer base that dwindles, or even that you might not get a paycheck.

Before you start printing price tags, consider taking an hour to explore a few pricing lessons. The SBA’s Introduction to Pricing self-guided course takes about 30 minutes and illuminates the impact of your pricing strategy on your overall business. SCORE’s Pricing Products and Services webinar lasts about an hour and reviews a variety of pricing scenarios you may encounter.

Whatever your product or service, here are a few items to remember when you’re considering your pricing strategy:

Research the market

Developing a pricing system that works for your business requires taking a critical look at both your competitors and your target market. What are customers willing to pay for what you have to offer? Checking out how much they’re paying at your competitors can help you figure out whether it’s best to compete on price, quality, or overall value.

Consider your sales method

Are you selling directly to customers, or wholesaling your products to retailers? Are you paying sales representatives, or closing deals on your own? Direct sales can ensure that more money stays in your business, but your product may have limited reach.

If you’re selling directly to customers, can they purchase online, or in-store only? If the former, you’ll want to consider the costs of shipping supplies in your pricing formula.

Consider value

If your product or service is unique, don’t feel pressured to lower your price. Instead, focus on the value of your unique product so potential buyers understand what they’ll get for their investment.

Avoid one-size-fits-all pricing

Think about how you like to purchase products or services. Can you offer packages and a la carte buying options for your customers? Having a variety of options ensures that customers find the right fit for them. In addition, offering a package at a slight discount can serve as a low-pressure opportunity to upsell.

Account for sales

If you plan to offer discounts during special promotions, anticipate those discount rates to make sure you won’t lose money during those periods. You may have to raise your prices slightly to account for any discounts offered.

Have a question about how to price your product or service? Call a SCORE mentor to talk through your pricing strategy.

About the Author:

bridgetwpollack
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:

Yea.. Nice points here Bridget. Also every product or service provider must consider the life line of their product, considering if the product is something that will be demanded once or twice in a lifetime or a product that will be in a need again even after the first buy. Putting the product life line will help a lot in determining price tags for that particular product or service.
One MUST realize that cost is determined by internal computations and factors. Price, on the other hand, is determined by the market. It considers EXTERNAL factors such as the perceived value placed upon the product/service by the user/consumer, the price of similar items that attempt to satisfy the same need, etc. Price is, at the end of the day, determined by the market. If you doubt this I would urge you to consider the Pet Rock, the Hula-Hoop, ink for ink-jet printers, etc. Basing price on cost of goods is a dangerous practice.
Before pricing our products, I think that we should know what the aim of the consumers is. Simply, it is the users’ trend. Then, continue researching the current market to seize its tendency and prices. We should weigh up everything carefully before making any final informed decision!
It is so nice to be shared this experience, now i am starting small business. I am confuse that do not know how to price my product while our competitor doing the business smoothly.

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