Wednesday, November 13, 2013

How To Price Your Products & Services for Maximum Growth

The most daunting task of a small business owner has to be pricing both products and services. There are quite a few pricing methods one could use to determine the price of a product such as competitive pricing, zero sum pricing, as well as premium pricing. One hard task one might face is determining which pricing method is most appropriate for your business.
  • Real and perceived value- You must know what your competition is offering, how much, how their products are similar to yours and how their product is superior or inferior to yours as well. A real world example of this is Rolex vs. Seiko. Both Seiko and Rolex offer watches that serve the exact same purpose, to tell time. Rolex has a higher perceived value as compared to Seiko, which means they can sell their product for a much higher price. This idea comes down to determining the actual cost of your product or service based on materials and labor. If you figure that into the cost of your labor, the result you end up with is the "real" value of your product before markup. 
    • Perceived value on the other hand, you must determine what your products or services have that your competition doesn't. This could come down to higher quality materials, uniqueness or rare items. One should calculate things like customer support, follow up service and free additions that the competition doesn't provide. 
  • Tiered Pricing- The automobile industry is the perfect example of tiered pricing. Usually, when you look at a car, you start at the base model which looks rather nice but it is missing a few bells and whistles. In order to get to those bells and whistles, you must go up a step or two in pricing. The next step offers a few more features but not the over-the-top luxury. The top step in pricing includes all the bells, whistles, luxury conveniences as well as a pretty hefty price tag.
    • This can relate to small businesses. This pricing model can allow you to attract more customers because your customers will always be able to find something in their price range. For example, if a customer purchases an inexpensive product from you and absolutely loves it, chances are they will come back and spend their money on something of higher value from you.
To continue reading about how you can learn to price your products and services in order to maximize your companies growth, click here.