Marketing Information

Small Business Pricing: Setting A Price For Your Product / Service


The importance of pricing can not be underestimated as incorrect pricing can often result in the failure of a business. New businesses often make the mistake of either charging too little or too much for their product or service. So to help you avoid making one of these mistakes, the following section will outline some of the guiding principles of price determination. Price is a key part of marketing. Setting prices is called pricing.

Pricing means more than how much you charge. Smart customers look beyond pricing when considering a purchase. Price is important but so are delivery times, guarantees, customer support and quality to name a few.

Small and home based businesses can - in many cases - do a better job than "big businesses" in some of these areas. You should evaluate your pricing based on this fact. You're small and don't have the inertia or paperwork logjams of a bigger business. You're quick on your feet and can change direction easily and quickly.How do I get started on pricing a product/service? There are 4 steps here suggested by us. This module may not serve all types of businesses so if you are not sure consult as many sources as possible

Step 1

Do your homework

You cannot determine prices based only on costs and desired profit margins. First step is to do a little research to get some "real world" pricing guidelines. You don't need a high priced marketing firm to help. Remember, you know your business better than any consultant. Refer to the micro module on Market Research or follow the following pointers on finding out what your competitors and other businesses are doing regarding price. Once again there is no substitute for getting out into the field and doing the research yourself.

Locate a trade association, organization or networking group whose specialty is your service. If none exists, find an association with a similar product. In general, associations can tell you the high-low and average prices charged by members. You can find some organizations listed at our Free for al links or at any local business advice center.

Trade/Business Journals and newspapers contain articles that may include prices. At least once a year, I see an article about my industry online or in a periodical that contains industry fees.

Ask your accountant or Coach for some ideas; after all, they deal with business owners all the time.

There are many career and employee guides that provide industry or job related prices. Consult any industry specific control or accreditation body.

Obtain the cost of raw materials and supplies necessary for your product. Surely you want to charge more than it's costing you for the items!

Many business owners place a pricing structure on their websites. Using the industry name, plus the word "rate" or "fees", you can find those sites on the Internet.

Determine your hourly rate. What is your time worth?

Call similar businesses, outside your local area, for their prices. If you're not their competition, you have a better chance to be told the score.

Visit stores that sell the product you're interested in selling to determine their pricing system.

Ask everyone you know "if" and "what" they will pay for "x". Ask prospective clients what they would pay for your product or service.

Step 2Determine Your Pricing Objective - What do you hope to achieve?

There are 3 ways to find the appropriate level for you and your product.

Base Price -- The lowest price or rate you must charge to cover your cost including, cost of living and keeping your knowledge and skills up to date.

Base Price is one of your pricing objectives. It's a very important one. This is the one figure you need know so you can keep your doors open. This is your break even point. The absolute minimum needed. Chargeable Time is the maximum number of working days/hours in a given year. This is the one figure most business owners never consider. It is the number one reason why you end up working long hours and long weeks for your business. Now divide your cost or Base Price by the number of days from your chargeable time figure. This gives you your daily income benchmark. The amount you need to be making per day from your products or service rates.

Be careful about lowering prices just to meet or beat the competition. There are, however, some good reasons to lower prices:

A strategy to increase market share.
Promote a new product or service.
Attract attention to a over stocked product.
Encourage high volume purchases.
Increase seasonal business (Christmas sale, etc)

Realistic Price -- Substantially higher than Base Price. Top of the quality range in your field but still competitive while offering good value and service to your customers.

Sometimes you have to increase prices in order to cover, for example, increased cost of materials, labor, etc. When an increase is necessary ease the pain for your customers by considering the following: Notify your existing customers of the increase and, if possible, give them an opportunity to purchase at the existing prices. Try and advertise the increase along with "new and improved" products or services.

Give the customer something in return for the increased costs. For example, free shipping with orders above a certain value. If possible, delay the increase for existing customers.

Premium Price -- You position your product for the "elite group" and go after the client who wants and can afford the best.

Daily Income Benchmark -- How Much Per Day You Need To Make.

How do you determine daily amount? You need two figures... Base Price and Chargeable Time.

Step 3

Consider some key pricing strategies

Pricing to the Market

Compare prices with your competitors for similar products and services. Set the price range that customers will expect. You can use that market price range--what is acceptable to the market--as a guide to set your prices. Businesses or people to whom you sell may also price to the market by telling you what they will pay for your product or service. As you keep records of actual costs, the cost approach to pricing will help you make sure all your costs are covered, which may not be true in a market approach to pricing.

NOTE: Be careful about underpricing in order to compete or make sales. Use competitor's prices to establish the price range for similar products or services but don't underprice; if your true costs are higher, your final prices will have to be higher.

Cost Approach to Pricing

Price must cover all costs of goods/services sold, including production costs of supplies, materials, fixed overhead, and time/labour, plus a profit. Costs should include costs of production, labour and non-labour, including overhead or fixed costs as well as supplies and materials. Use this simple formula in setting a price (per unit):

Total Costs of Production Per Unit + Desired Dollar Profit Per UnitBusinesses can set different profit rates, for example 15% profit on supplies and materials, 20% profit on labour/time, and 25% profit on overhead. These more complicated approaches to pricing usually emerge in response to the special needs of a particular business.

If your research reveals that similar products or services are available on the market at a cost much lower than what you could offer, you may have to either adjust your profit margin, the return you expect, or decide to provide enough specialized service or selection that the market will pay the extra. Alternatively, you may be forced to conclude that you cannot afford to make this item or provide this service and look for something else to do.

NOTE: Remember to cost materials at the level it costs to replace them - NOT at original prices; include salaries as a business expense; include interest in your business cost calculations -- interest that could have been accrued had the money used in the company been invested elsewhere (i.e. a bank); make allowances for future refunds, servicing, bad debts, amortization of capital costs of equipment or machinery.

Calculating actual costs is the only proven way to make sure your prices cover your costs. Labour/time charges are to be covered partly in the costs of production and partly as a salary in the fixed/operating or overhead costs. In summary, key points to consider in setting prices are: marketing strategy and your immediate goals competitors' prices, and the market market demand for the product and consumer buying trends need to cover costs and provide an adequate profit.

Step 4

Price your product and review regularly

Don't guess or do your pricing on a whim. Take time and go through the process and you'll be on the right track to a more successful and profitable business.

The biggest mistake small businesses make concerning pricing is not reassessing pricing on a regular basis. The marketplace is constantly changing making it mandatory you keep a close watch on your pricing. Raise or lower prices as necessary keeping the above suggestions in mind.

Whatever route you choose, even a small increase in price can have a big positive effect on the bottom line-especially if you're a high volume producer, notes co-authors Dolan and Simon. If Coca-Cola raised its prices 1% across the board, the company's bottom line would rise by 6.4%, they write.

Remember that you can always increase your price.

Learn more at http://www.my1stbusiness.comBen Botes MSc. MBA, is an Entrepreneur, Speaker, Writer, Coach and academic. He is the founder of My1stBusiness.com, a web portal dedicated to 1st time business leaders and entrepreneurs. He is also the Co-founder of South African Business Hubs, Business support Hubs and incubators for the new breed of South African Entrepreneurs. Visit the sites for contacts, networking, a MarketPlace, hundreds of free Micro Modules, Tele-classes, Resources and Coaching designed for you to succeed with your business.Join the My1stbusiness.com Reseller Program and earn 40% referral commission http://www.my1stbusiness.com/affiliate

Read Ben's Blog at http://www.my1stbusiness.com/weblog


MORE RESOURCES:
Business:Marketing Articles from EzineArticles.com
05/24/2018 08:33 AM
Five Changes You Should Make To Your Marketing Strategy Right Now
In business, marketing is looked at as a given, as a piece to a well-thought business plan that relies on ingenuity, research, and a steadfast commitment. The problem is that sometimes a business's marketing strategy is not very good, and the best solution is to start making changes as soon as possible so as to keep from the current plan from sinking the business's chances for success.
05/24/2018 08:33 AM
The Best Customer Profiling Can Change How You Do Business
It shouldn't come as a surprise to people that being in business, especially being successful in business, is pretty darn hard. There are a number of ways a business can thrive, but perhaps the best tool said business can use is that of best customer profiling. It seems like a very reasonable goal for any business, but considering how many businesses tend to swing and miss at employing this particular strategy, it's obvious that there is a disconnect somewhere.
05/23/2018 02:50 PM
7 Pillars of Marketing Management
Marketing management refers to the process of planning effective marketing strategies, advertising and promoting the products and services, and managing the sales to reach the customers so that the company gains immense profits.The managers can ensure effectual marketing management by paying heed to 7 parameters that serve as pillars of marketing.
05/21/2018 11:02 AM
Automotive Biometrics - The Trending Growth and Implementation in the Automobile Industry
Did you know that automotive biometrics technology has an extensive application? This industry is developing at a fast rate. Reputed automakers have shown their interests in implementing the multi-factor and two-factor authentications in their vehicles. Know more about Automotive Biometrics Market and its trends.
05/17/2018 02:46 PM
The Secret Digital Marketing Weapon for Your Business
As a professional service provider, you're paid for what you know. People come to your marketing firm for the expertise you offer, first and foremost. Did you also realize that this is also your secret marketing weapon? By sharing what you know, you attract people to you and build their confidence in you as the right solution for their problem. Now many professionals are afraid to "give away" trade secrets or expertise for free, but that's not what I'm talking about. This is about putting content regularly out into the marketplace that is of enough value that prospects will automatically think of you when they have a need.
05/17/2018 12:12 PM
Why Schools Don't Want To Talk To You (Or Hear About Your EdTech Product)
Find out how to get in front of your edtech customers. They'll be hanging onto your every word.
05/16/2018 09:48 AM
4 Reasons Why In-Person Event Marketing Is Essential
As the online space grows ever more crowded, in-person events are becoming more essential than ever. They offer the valuable opportunity to speak directly to your target audience and form in-person connections with them. At an in-person event, you can get immediate feedback and control the customer experience in a unique way. This is why event marketing is an essential element of your marketing mix.
05/14/2018 08:55 AM
Foolproof Strategies To Boost Up The Customer Acquisition
Customer Acquisition is the key to a company's success that helps them be at the position, they have ever dreamt of. There is no denying in the saying that customer is the king and true asset of a company. And adding a new one in the clientele is important, but keeping the existing one is more important, thus, you have to prepare sets of actions that help you kill two birds with one stone. Here are some methodologies that one should follow to boost up the customer acquisition and, to maintain an unbreakable professional bond with them.
05/12/2018 06:46 PM
5 Tips for Buyers for an Effective Product Sourcing
Sourcing can be a challenging process for seasoned buyers as well as for the beginners in the fashion industry. But if you know the right way of doing things, you can become a successful buyer and take your business to the next level. There are some tips that you should follow to ensure an effective sourcing of your products. You should be open to learning and gain as much knowledge as you can, try to develop healthy relations with designers and manufacturers, focus on fulfilling the demands of your customers, and offer the best quality products.
05/12/2018 06:37 PM
Spirituality and Your Business
Your business isn't just about marketing and income and strategy. It serves a higher purpose. It connects you with others. It serves the impact you want to have, your unique positive contribution to the world.
05/10/2018 08:07 AM
What You Can Expect From A Good Productized Service Software
Productized services are simplified and focus the business marketing operation into a more predictable model that is easier to sell. The services are packaged in such a way that they are more like products which sell easily. Most service providers are productizing their services because of the various benefits they come with including:
05/09/2018 11:21 AM
Content Was, Is, and Will Be the King
Everything and anything; be it branding, marketing or advertising; content matters the most. Here's why content was, is, and will always be the king. Even while trying to sell a product, try and make the content sound not like a speech a salesman would give. Good content is a gift that keeps on giving. And if you deliver it consistently, it adds more traffic to your website. The stay period on the website, returning customers, ads well as referrals; everything is based on how good the content is and has the power to grab and then sustain the interest of the customer. Engaging content leaves a certain impression, and that's hard to get rid of, be it positive or negative. If you want the user to have genuine interest and interact with the brand, the content needs to make them feel comfortable. Try too hard to sell and the comer will back off. Make them brand advocates and fans of your product by good content, consistently. You can wow people into opening the fancy package and anticipating wonders.
05/09/2018 09:10 AM
*ENTIRE* Marketing College Course Condensed Into A Single Article - Product Vs Offer
College - and most "marketing" education in general - typically teaches you the 4 P's of the "marketing mix" - Price, Product, Promotion & Place. If you have an ambitious teacher, you may end up with the 7 P's. Either way, whilst these are a great way to describe the effects of existing marketing/products, they're actually a very poor representation of how to *create* new products. The way to do this is to focus on the TWO things that matter - "Product" + "Offer".
05/09/2018 09:07 AM
Untold Benefits Of Investing In Promotional Gifts
Promotion is not as easy as it seems and doing it right is not a cakewalk at all. You need to think something new every time to make your very first and lasting impression on the clients. It is a clever form of publicity that helps you gain client loyalty and their words for life.
05/08/2018 04:04 PM
Is Jesus the Greatest Viral Marketer?
Do you need social media to spread your word virally? If you don't is Jesus the greatest viral marketer?
04/30/2018 02:26 PM
Marketing Messages: Make People Feel, Not Think
One of the most common mistakes in marketing is using messages that are designed to make the audience think. It's far more effective to make the people you're trying to reach feel some kind of emotion. This article explains why feelings outperform thoughts every time.
04/30/2018 02:23 PM
Leveraging Client Personas to the Hilt
Personas are necessary for all businesses. The personas that you develop will help you to share relevant effective content to your target audience.
04/29/2018 06:18 PM
How To Market Your Business Using The Hub Effect
On an old stagecoach a hub is the centre of the wheel. The spokes radiate out from the hub to the wheel ring upon which the wheel revolves. A hub is also a center or core of a network from which 'stuff' generates inwards or outwards.
04/27/2018 09:25 AM
Importance Of Gift Giving In Business
In order to grow your business and increase sales, you need to always think of ways you can increase your customer base. Giving of gifts in business is one of the most effective ways to increase your customer base and increase sales. Showing your clients and business partners that you appreciate them for doing business with you is a smart way to secure loyal clients and business partners.
04/26/2018 03:54 PM
My Single Best Tip for Better Marketing Results
Marketing can get pretty complex, with a lot of moving parts. Before you even get to that stage, make sure your foundation is solid.
04/26/2018 03:23 PM
Top 10 Content Marketing Tools
Content marketing tools will help you to know many content marketing technologies and the tools that are available to find the best for your needs. In this article we are giving the top 10 content marketing tools that you should be using to boost the performance of your campaigns.
04/24/2018 11:24 AM
Online Mobile Panels: Market Research in the Mobile World
Market research is changing, and smart businesses are seizing the opportunity to use smartphones to gather data in a timely, efficient way. There are two options when conducting market research in the mobile world: in-app surveys and mobile-optimized surveys that are housed on a webpage and accessed from a smartphone. We have compiled a list of reasons why mobile panels online are the future of market research.
04/23/2018 11:53 AM
5 Easy Steps To Getting Speaking Gigs Like An Expert
One of the best ways to present yourself as an expert is through speaking from the stage. When you are standing behind the microphone presenting your ideas, thoughts and opinions, you will have an audience expecting and wanting you to share your knowledge. Speaking from the stage is a great platform for you to represent your brand, products and services. If you want to have speaking engagements as part of your plans for your business, here are 5 ways to get gigs.
04/18/2018 11:11 AM
How to Get More Customers in My Store or Business
So you have a great product that you have worked hard to turn into a business. You have created a great looking website and posted all over social media to let people know that you are officially in business... and... you are only getting a trickle of customers. How is this happening?!
04/18/2018 10:51 AM
Brand Loyalty & Retention Rate Relationship
Brand loyalty increases customer retention rate. Customer retention rate is an important factor to determine business growth and strength. Brand loyalty and customer retention have an established relationship. Business brands are now using customer retention strategies & personalized content to drive customers to increase engagement & improve digital experience.
04/18/2018 10:12 AM
Who's Hiding in Your List?
Why it's important to build a customer database. Build a three-dimensional database and you not only have a ready-made customer base, you also have access to expertise, referral partners and much more. This is for business owners who think it takes too much of their valuable time to create and manage databases, while spending their time and energy chasing the next customer.
04/18/2018 08:13 AM
How to Think Like a Marketer
Many people say they hate marketing. That's usually because they think marketing is all about advertising and sales. Marketing is a process, not an event. It involves research, promotion, and distribution along with advertising and sales.
04/17/2018 11:51 AM
What Is Market Research?
Market Research is the technique of assessing the viability of a new proper or carrier via studies performed directly with the patron which permits a company to discover the target market and report evaluations and different enter from clients concerning interest inside the product. Market studies may be conducted through the employer itself or via a third-celebration enterprise that specializes in the market research subject.
04/16/2018 02:55 PM
Content Marketing is a Surefire Way to Boost Your Business
Steps to increase the productivity of your business through content marketing. The written content must be coercive to attract customers in order to build your business.
04/16/2018 10:58 AM
How Bollywood Movies Help to Learn Marketing Lessons
The digital world has introduced several new opportunities and ways to develop and enhance marketing of the products. The marketing strategies of the Bollywood movie offers a real-time platform to grasp the basics of the promotions and advertising. With focusing on the real fact, marketing gurus also justify the concept and strategies of marketing from Bollywood Movies.
04/16/2018 09:40 AM
How Marketing Mix Can Help Small Businesses Grow
If you are doing all you can to grow your small business but nothing is working, you might want to take a step back and reconsider your marketing mix. Doing the right type of marketing at the right place and at the right time requires some brainstorming, research and analytical approach. Take a look at what marketing mix is and how you can use this concept to grow your small business.
04/16/2018 09:17 AM
The Perfect Store Concepts For Repeat Visits
Catching your customers' attention when they walk in takes work. From the color to the furniture, from the placement of your products to the friendly smile you shine at them from the cashier counter. Whatever it is, understanding consumer behaviour will keep them coming back. So, here are some nugget of thoughts to chew on about how to attract and keep your customers.
04/16/2018 08:59 AM
Seven Ways to Build Your Marketing Skills Without Going Back to Study
Today, more than ever, we are living in a world where access to learning is so readily available, it's on tap 24/7, 365 days a year, from anywhere on the planet. Much of this is for FREE. Even the busiest person can develop their marketing skills if they are hungry enough and know where to look.
04/13/2018 01:17 PM
Content Marketing Tips That Will Boost Your Sales And Profits
Content marketing increases your site content so you can grab audience attention. This kind of marketing also offers you higher visibility by search engines, increases the domain authority and brings more social traffic your way. With the right marketing strategy you can be sure to enjoy improved brand reputation and customer relationships which is why you cannot ignore it. A few simple strategies are all you need to start enjoying good sales and profits for your brand and they include the following.
04/08/2018 10:54 AM
Track Your Marketing For $80 a Year - Or Less
Landing pages are great. You can - and should - set one up for each different ad or content marketing effort you put out on the 'net. Landing (or squeeze) pages are the Holy Grail when it comes to automatically adding contacts to your marketing & sales funnel.
04/05/2018 08:21 AM
Want to WIN More Customers? Think Like a "Professional Scout"
To build true Differentiation and Uniqueness in your market/industry you want to look beyond your products and services. They are easily commoditized today. What isn't easily commoditized is your Customer Experience. When you create an "over the top" customer experience you demonstrate the true "heart" of your company to your customers. Customers want to see this... it's your DNA and describes who you really are to them so they start to feel special and important... much like what a Professional Scout does when looking for prospective athletes.
03/27/2018 09:48 AM
The Real Difference Between Marketing and Advertising
Most people believe that Marketing and Advertising are the same thing. Fact is they're not. What is known as advertising, is just a part of the whole game, which is marketing. Marketing includes the complete development of a brand, starting from the research then continuing to designing, advertising, sale, etc. Advertising is considered a part of the whole marketing process, which sends the message using several mediums, in order to promote a product.
03/26/2018 09:50 AM
Positioning A Product
If you have a business or product, it's actually more effective to be very specific about who / what you center it around. Most people make the fatal error of trying to position it to "everyone" (or insert another huge demographic). Whilst this works logically, in terms of the underlying way a business may be best placed to progress, this will not work very well. Thus, it's strongly advised that you become extremely focused on what it is you're actually there to do.
03/26/2018 08:17 AM
Three Ways Audience Definition Can Save Your Marketing Strategy
If you are new to the world of marketing strategy, the concept of audience definition may be a bit alien to you. That's OK because it is to most people. Perhaps the best way to illustrate what it entails is to think about two people discussing any given topic. Each person has taken up one side of the discussion and is arguing its merits to the other person. The problem is that the argument is going nowhere. Over time, voices get louder & what was once a discussion is now a shouting match with one common insult: "You don't know what you're talking about!"
03/21/2018 02:08 PM
How to Get Started With Referrals
As a small business owner you are much closer to your customers than large businesses are. This brings a powerful advantage in marketing with your existing customer base. This article lays out some referral strategies to take advantage of your existing relationships.
03/21/2018 12:33 PM
Those Who Can, Teach
What's a proven way for Solopreneur consulting service providers to demonstrate expertise, distinguish yourself from the many "me, too" competitors; position yourself as a thought leader; and work against being perceived as a commodity? Teaching! The old proverb, "Those who can, do and those who can't, teach" doesn't hold up in the 21st century marketplace. Teaching is the smartest-ever marketing activity. You get paid to do it, so along with being an effective marketing activity, teaching simultaneously benefits your cash-flow. If that's not enough, through teaching you will become a better public speaker and better able to promote yourself as a keynote or a panel moderator.
03/20/2018 09:25 AM
Marketing and Product Development Professional
First of a series of articles on the steps of the Product Development process and what to look for on a successful launch of your product. The focus of the articles is to understand how to avoid failures before it's too late and how to succeed projections for your product.
03/19/2018 03:56 PM
Strategic Customer Attraction Marketing Blueprint
With the ever changing face of the economy the trend to more and more people choosing to start their own business for various reasons continue to rise. With that said - along with this trend there is an increasing need for structured marketing process and client acquisition processes and methodologies.
03/17/2018 10:37 AM
Global Milk Industry Trend Analysis and Outlook
Milk is considered to be a complete food and hence is an inevitable part of human diet. For any mammal, milk is the primary source of nutrition, especially for infants, since this white liquid is easily digestible.
03/16/2018 12:30 PM
How to Make Marketing Investments Pay Off
Customers are your source of revenue so it makes sense to invest money into attracting, converting and retaining them. But as you plan your efforts, here are a few things to consider to make your customer investments pay off.
03/14/2018 12:59 PM
Pricing Graphic Design Projects
Here are some suggestions on how to put value on graphic design services. Using three components, hourly rate, market value and client budget, you can determine what design services are worth and still make money.
03/12/2018 03:10 PM
Marketing Automation - Why Has It Become the Need of the Hour for Marketers?
Marketing automation as a tool has come of age very recently to compete on the technology front and is doing wonders already. A stat provided by Forrester in its report "Gauging Your Progress and Success" mentioned that 58% of top-performing marketing companies have adopted marketing automation. The technology is supported by various other statistics, which stress mainly on the use of marketing automation tools for considering both simple and sophisticated campaigns. All the stats aside, you need to understand whether it really is a good idea to start with. What does it do other than sending automated emails? Firstly, you need to find out your needs, and then understand an automation tool that matches your requirements and offers tailor-made benefits.
03/10/2018 01:12 PM
10 Super Sales Tips to Smash Your Records
Sales methods and techniques are meant to give you a boost in your sales figures. Here are the top 10 salesman tips for a better salesmanship. I tried to explain all these top selling techniques in a very lucid and practical manner.
03/09/2018 11:34 AM
3 Things You Don't Do Now That You Used to Do for Your Business
Business been heading south lately? Perhaps you've stopped doing these three things that you used to do when it was new.
03/08/2018 03:55 PM
Dishonest Marketing: Deceit Is a Lousy Way to Start Relationships
Think the best way to catch someone's attention is to lie to them? Believe that it's okay to trick someone into reading your marketing or sales message? This article examines why that's a fundamentally flawed approach.


home | site map |