Pricing is super important for “making it sells” and “making your profits”. Agree? But often times for new business owners, they are sometimes overcharged and on the other undercharged. Thus only profiting is just a dream. Because they lose both ways; overcharged they get less sales, and underchared they make losses for every additional output.
What are things to look for when we do our pricing plan? How to determine the correct pricing strategies for our product? Here are EIGHT Tips on Pricing as a guide.
1. Have a pricing plan
– i always emphasized on having a plan including pricing plan. it’s like this, before you launch or introduce your product/service, i suggest you to take a piece of paper and write down what you plan to sell and how you plan to price it. write it down and see it for yourself. does those information make sense to you?
2. Know your segment– different price is for different segment? Yes, this is fact. i know someone who sells women dress that he gets from a supplier price $45 for segment A and charge $95 for segment B. Segment A receives the dress in a plastic bag and segment B in a striking colored brown bag. Got it?
3. Know your cost
– many costing methods covered in my book Marketing Plan Breakthrough S6PEC such as cost plus, mark up and so on. But the gist is, “know how much you paid for the product”. The cost you should include are raw material, transport, miscellaneous and time. Then you break them down into per unit cost to see how much is the cost distribution. if you are running a restaurant, factor in your fixed cost like rent, overheads and utililities. If you are selling services, most probably your additional unit production lessen at least by 30% – 50%. So do the math!
4. Set your pricing point
– pricing point should include your minimum profit you want to make. Say you use mark up pricing at 20%, therefore your $10 cost price should be sold at minimum at $12 because you marked-up 20%. But as question whether 20% enough for you to sustain business? Therefore, when you set pricing point please include your risk factor as well. for example slow season, pilferage rate, spoilt and so on.
5. Multi pricing
– lately i realize multi pricing can give greater profits if done correctly. i have a friend who runs a toy shop and whenever certain toys on high demand, he will increase the price that is enough to make him keep up with the competition (when he priced lower, customer may think his product is inferior and when he priced too high, customer may think it’s too expensive!). what he does is to gauge the demand and look around pay attention to his customers and competition. he will reduce certain less-demanded toys and display it at the main storefront. when customers are “captured” with the cheaper toy, he goes in and then he will see the high-demand toys and the rest is better sales and greater profits. customers and sellers happy!
6. Keep your overheads intact
– this is important when you have sales team working on project selling (involve in large contracts and items) or you work with distributors. Sometimes, after working with them for a particular project, you may realize your cost run too faraway and eat up into your profit. i recommend to have constant check and monitor the performance vs incentives vs achieved sales
7. Scan your environment pricing
– it is common now to have competition in any business you go. there are always someone who has done it first, therefore i recommend to do a little benchmarking. but not getting overwhelmed with the data, but rather “be in the know”. For example consulting is becoming more expensive and sometimes too expensive. are you willing to make it cheaper and still offer the same or greater material and content? 🙂
– when the trend comes, demand will surge like crazy. i still remember a friend of mine who imports Tamagochi (virtual pet) 10 years ago. it was “D” thing and it was super hot. One Tamagochi can sell up to $40 and that is consider average price. He bought tonnes of those pets and within 2 years those pets is a fad. no one plays Tamagotchi anymore because many already can afford Sony Playstation and so on. Watch the trend because when the trend goes off, you are sure to make losses!
I highly recommend you to view and subsequently purchase it. it’s only USD 24.50 (ONLY USD 19.90, WITH LAUNCHING DISCOUNT!) and that will give you better control and ideas on how to manage your business. Buy Marketing Plan Breakthrough S6PEC here