One common mistake most business owners make is failing to accurately determine the appropriate amount they should charge their customers for products or services. In their attempt to draw in more clients or buyers, they could lower the prices for what they offer.
It can be challenging to find a sweet spot for product prices, but with proper planning and a good guideline to follow, you can ensure that you are neither overcharging your clients or undercharging them to your detriment.
Know your worth
Finding that balance between charging too much and charging too little for your product or service begins with knowing what your product and what you are offering is worth. A good place to start with this comes from your understanding of the market you’re operating in. Your competitors in the business have a price range for their product or service.
Before you begin, have every relevant information about generally accepted prices of your product or service in your category. Ask yourself how low your price should be to stay competitive and still bring you significant profit.
Do the math
Understand the product or service cost to you. In this case, there may be several factors to consider. The time you spend to make or provide that product or service has its relevance. If you have a product that you have to sell, the cost of making that product has to be taken into account. The base costs for acquiring what you need to offer that product or service should be where you could start calculating the price of what you have.
Make pricing decisions based on buyers and clients
Your buyers and clients can come from different sources to get what you have to offer, and the sources from which they come can affect your product prices. Will you skip the middleman and sell directly to stores? Are your clients and buyers coming to you directly or buying online? Or are your clients approaching through referrals mostly?
The exact price of a quality product is important
There is a little psychology in the pricing of items for sale. For instance, most people will rather avoid the more expensive drug in a drugstore because of the value they have placed on the product and what it means to them. Some products could be overpriced because of the value placed on them. And this has little or nothing to do with how they were made.
Finally, test it out
Deciding your prices cannot be once and for all. Over time, you will find a need to either reduce or increase the price. Inflation and other factors can induce price increment in your raw materials. Experiment with your options and always be ready to make the tough calls.