TechInAfrica – Pricing products and services for most entrepreneurs is one of the key aspects to success in business. You need to consider some important factors to set the best price for your products and services.
Whether you have good marketing strategies to market your products and services, but if the pricing isn’t proper, your business will fail eventually. Pricing can determine the profitability, growth, cash flow, and ultimately the business success.
The pricing structure can vary, depending on what types of products or services you’re selling. However, no matter how varied the pricing structure will it be, the method is the same.
Here are some useful tips you can use to set the best price for your products and services:
1. Total up the amount of spending on product/service production
The first thing you need to do when you want to set a price for your product/services is to calculate the total amount of spending on producing or creating your product/services. The costs are including raw material, transportation, labor, and many other costs that determine your product and service price.
2. Understand the value of your product/services
The second thing you also need to do before setting your product/service a price is knowing the value of your product. To know the product value, you need customers of similar products. There will be a market research needed, including surveys or questioners on what a wide range of people think about the product/service, how much they would want to pay for it, and what amount of price they would not want to pay for it. It’s just some examples, you can generate more specific questions regarding the public’s perception on the product/service.
3. Knowing how much it’s sold by your competitors
When you have determined the production costs and the product/service value, the next thing to do is how much price your competitors set for the similar product/service. There will always be companies sell product/service at high prices or low prices. But knowing your competitors’ price for the similar product/service, enable you to determine your own price based on what type of customers you want to target.
4. Determine the percentage of profits you want to earn
You can also set a price for your product based on what percentage of profits you’re aiming at. You can set it after calculating all the unit cost, value and the competitors selling price. After calculating all of that, let’s say you want a profit of 30% or price the product/service at 150% or more of the cost price. You can always set a lower or higher price than your competitors’ price to show the brand value.
5. Price the product based on persuasive point of view
After figuring the percentage of profits you aim at, now you need to determine the price based on a persuasive point of view to find prospects. For example, you could set a $150 product for $149, a 1,500 product for $1,450, and so on. This method usually works since customers tend to unconsciously act on and think it’s not out of their financial capacity.