For most companies determining the price of their products and/or services is more of a guesstimate then a structured procedure. Many assess their pricing by trying to be lower than their competitors and thus underestimate the cost of running the organization making it difficult to gain a reasonable profit.
This is a dangerous strategy and can make your business constantly walk a tight rope. A far better approach is to assess all aspects of your organization, industry and niche to ensure that your costs are covered and your profits are in line with your expectations.
When assessing your pricing it is absolutely critical that all your costs are accounted for. This includes the lease, salaries, utilities, insurance, equipment, etc. It is also important to cover the future costs such as interest on loans and depreciation on infrastructure.
Know Your Market
Next is to assess where your company lies in the market against your competitors and your industry. Do not just compare prices. There are many factors that can differentiate you such as location, customer service response, quality of product, etc.
Lowering your price because your competitors decided to do the same is not a viable long term strategy. This can cause a price war and can leave you and your industry vulnerable to many future unforeseen economic issues that are out of your control. It is important to note that if customers perceive your only competitive aspect is in your pricing then they may decide your company is not necessarily the best option.
Alternatively it is important not to overprice your product and/or service. Instead, identify your point of difference and factor this into your price. Customers will willingly purchase a higher price product from an organization if it portrays a high level of quality and service.
Leave a buffer in your price so that you can be open to negotiation. If you are willing to negotiate you are more likely to gain favour with the prospective client. However ensure you have a definite price floor before you begin negotiating.
Bulk Purchase Discounts
It is always a good idea to give discounts when customers purchase in larger volumes than the norm.
Another strategy is to charge extra for special requests such as faster delivery, last minute changes, etc.
Overtime it is necessary to raise prices to keep in line with inflation and other supplier price increases. Just be aware to research thoroughly before making changes as they are difficult to reverse once implemented. Also make changes progressively as clients never appreciate sudden increase in prices.
The best way to make changes in your pricing is to seek professional advice. There are many business tools to help you gain a clearer insight into your pricing strategy. Management Consulting Sydney, Marketing Consultant Sydney.
At Illumina Business Consulting we are experts in building successful growth strategies that ensure you a stronger, profitable, more valuable business. Contact us at info at illuminaconsulting.com.au for a free, no obligation consultation.
Author Name: Alicia Grant specializes in writing in all areas of business.
Address: PO Box 647 Edgecliff, Sydney NSW 2027 Australia