Entrepreneurs Brief Guide
“How to Price Your Products and Services”
Dr Jim Porter
Deciding on the price of your products and services is a very crucial step as the right price could help you to double your profits instantaneously. There are many methods for selecting your price, although most new businesses opt for cost-plus pricing in which a certain mark-up is added to each cost figure.
In 30 minutes, learn how to:
Build your cost structure
Check your competitors’ prices
Offer discounts
Increase prices
Copyright
How to Price Your Products and Services
Dr Jim Porter
Revision: SW2.016.001
Copyright © 2011 – All Rights Reserved.
Smashwords Edition
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ISBN:
978-1-4661-7973-8
Publisher: Smashwords, Inc.
Deciding on the price of your products and services is a very crucial step as the right price could help you to double your profits instantaneously. There are many methods for selecting your price, although most new businesses opt for cost-plus pricing in which a certain mark-up is added to each cost figure.
Decide on your pricing strategy
In preparation for setting your price strategy, it is vital to find out what your competitors are offering and at what prices.
Setting your prices too high or too low without a good reason is unwise and can be counterproductive. If you set your prices too low, you will undermine the profitability of your business. However; if your prices are set too high, you will endanger your business of losing customers, unless you can offer them something they can't find elsewhere.
If your customers have a good perception of your products and services, they will be encouraged to buy from you, even if your prices are higher than your competitors. As already stated, unreasonably high prices may deter customers from purchasing your products.
You may wish to consider offering loyalty discount to customers who repeatedly purchase or buy add-on or related products.
Difficult customers may cost you money and you may wish to deter them from buying from you, as they are difficult to satisfy.
Cost/ Value/ Price
The cost is the total expenditure incurred in the production of a product/service whereas the value is the worth of the product/service for the customer.
Most businesses maximise their products by matching their pricing with the value of the products with the customers. For example, computer print cartridges cost less than £5 but are sold at higher prices as their value is high for the customer due to the fact that printers are ineffective without ink
Products are generally priced on a ‘cost-plus’ basis, whereas service pricings are based on ‘perceived value’. A thorough understanding of costs and competition is required before implementing either of these methods of pricing.