Especially if you are in a very competitive business, pricing is always an issue.
If the price is too high, you give away business to a competitor.
If the price is too low and you cut your own throat.
The easy way out is just to discount and hope you make it up in volume.
However, that is a risky strategy, as many out-of-business companies have discovered. I like to say, there are no secrets in business, there is just information you don't know yet. So when it comes to pricing, here are 5 great ways to get your pricing right:
1)Stop discounting. Never discount. All it does it just takes money out of your pocket and off your bottom-line. Realize you need to profit in order to survive and price your product and service accordingly. You may lose some customers, but that's okay. Your competition will scoop them up and will be forced to figure out how to profit from the "price shoppers" they now own.
2)Use different margins for different products. There is no rule that says all products need the same margin. In reality, slower moving items need higher profit margins. You can afford a smaller margin based on high sales volume. So figure out your margins and volume, then price accordingly.
3) Know the difference between margin and markup. Margin is based on sales price and markup is based on cost. This will save you from discounting a 100% markup with a 50% off sale. Trust me, this is more common than you think.
4)Take all costs into account. Know all your costs. Even "little" things like credit card processing fees typically add 1-2% on every transaction and really add up over time. Know them, account for them, and make sure your prices cover them.
5)Find ways to add value. Instead of discounting, add value. Ask yourself if there is there a way you can add value to your product or service. This "value added" proposition means you can "give away" something that won't come out your profits. Done right, it can also add to the experience your customer has of both the transaction and your company.
Know going in to the pricing war that you won't win every battle.
But in the long-run, the extra profits you'll make from your new pricing strategy will win the war, and will ultimately take your company great success.
Disclaimer: All information on this site is provided for informational purposes only! By no means is any
information presented herein intended to substitute for the advice provided to you by any health care or other professional
or organization.
