Setting the price of your products and services is a skill you
can be used multiple times during your career.
Errors can cost you dearly or result in lost opportunities. In this post,
you’ll find a collection of articles that will give you a firm overview of
how you can set the price of your products and services, resulting in strong sales and profits that can last.
Before you get to the resources, I’ll share a few points to consider.
Setting Your Price Too High
When you set the price of your products and services too high, you will set yourself up for failure. You may have better profits, but you could be losing out on the volume of business. Looking at the long term, that extra profit is not worth it.
Here are a few brief points to consider when your prices are
higher than the competition with no added value.
You may have more returns with a higher price simply because people
have discovered they could get the same product for less than what they paid.
When people know your prices are higher, they won’t buy from you. They may have many thoughts going through their heads, like, why are the prices higher here? I can get the same item for a lot less, this place is expensive, etc.
If you have a reputation for high prices, you will lose customers before they can even come through the door.
Pricing Too Low
When you price your products and services low, you may attract more customers and increase revenue. Still, your profit on those sales may not be enough to pay your bills or invest in ways to build your business. You may have to sell thousands of items monthly to pay your expenses, compared to selling less of the same item if you have a decent profit margin.
Prices Set at Market Value
When you set your prices at market value, you’re not too low or too high. You’re just right. The issue is when you’re just right, customers aren’t worried about being charged too much, and you’re not working for free.
Another thing you can do, especially for unique products and services, is to price test. When you get feedback, you let your customers give you the best price.
For example, if you’re selling digital products, you may think that selling a course for $9.95 is the best price, but with a price that low, it may be perceived as an inferior product. If you price it at $27, $29, or $49, you may have better sales because the customer feels the product is better than if it was priced at $9.95. Split testing is an accurate way to find the sweet spot.
Above, we discussed how low pricing can hurt your bottom line, how high prices could scare customers away, and how being at market value is the safe spot.
Now, let’s go over a few more issues related to pricing.
Whether you price your products and services above, below, or right at market value, you need to add an element- that is, to add value!
If you think about it, why would your customer buy from you? What makes your business different from any other? Here are a few ideas to add value.
- Have excellent customer service.
- Provide a wide selection of products and services.
- Create a unique shopping experience.
- Become an expert in the products and services you deal with.
- Provide quality.
- Provide convenience.
- Provide excellent warranties and customer satisfaction guarantees.
Using Price to move inventory
There are times when you want to lower your prices. For example, if you have inventory to liquidate or perishable goods approaching the expiry date.
It’s better to lower the price than to have inventory lying around or expired.
With perishable goods, the profit is made with the freshest products.
The leftovers may be priced near or below cost. The goal is to recover as much of the cost as possible on the older product while passing on the savings to your customers.
How To draw customers through the door with price
A loss leader refers to pricing items below cost to attract customers. Some people may purchase only that item, but many will purchase many more items just because they are already in the store and it’s convenient. The profit on the extra purchases overrides the cost of the loss leader.
A loss leader is also a great way to promote your business. You can use this tactic on various products and services to build a strong customer base.
Keeping your Profits While Having Happy Customers
You can hang on to your profits and have people come through your doors by creating package deals.
For example, you could package a computer, printer, wireless headset, and extended warranty together. Now, you have created a unique package and added value to your product.
The key to packaging these types of deals is the ability to purchase one or more items at a reduced price. This way, the profit of the other items is high, allowing you to provide a great deal for your customers. The key is adding value in the eyes of the customers, or this method won’t work.
If your price is at market value, people would be better off buying from you because of the package deal.
Below, you’ll find a unique collection of articles from various authors providing a strong foundation for the many formulas available for pricing your products and services. Have a look at the sections below to find the method that will work best for your business.