One of the areas that many businesses struggle with is pricing of their products. Many times these prices are set low at the beginning of a business startup or just a guessing game for the most part. There are different methods to determine pricing for your business such as tallying up every cost associated with a product plus profit, charging by the hour, or bidding on projects with a fixed price. I as well as many have tried all or many of these and they are a constant struggle to keep in line. If we were all like Walmart it would be a little easier however the nature of many businesses does not allow for a one price fits all type of pricing strategy.
The first step to knowing how to best price your products is to know your costs, how long does it take to manufacture, what materials are involved and so on. The next step is to know what the market will bear, are you in line with other suppliers of your product types and what is the norm of the market. The third step is knowing what are the unique selling features for your product, do you offer a special guarantee, extra benefits, different materials, what is the customer getting from you that they are not getting from your competition? Armed with that information you are able to decide where to position your business among the competition and on what type of criteria you want to promote in your marketing plan. Try not to compete on price as competing that way will put you close to the bottom of the rung in competition and kill any benefits that you may offer.
Once you have your unique position laid out you are ready to start marketing. I find one of the best ways to work is to have a standard price that can be adjusted based upon the clients demands or project scope. This gives you some flexibility but gives you a good starting point. Evaluate your pricing on a regular basis, I usually adjust our pricing at the end of our year end each year some products go up, some get thrown out if they were not working and others may stay the same if they are working well. Try not to change pricing in the middle of the year if possible as it creates confusion for your staff and customers. By waiting until the end of the year you can have a total look at the way your business operated over the year as a whole as opposed to one quarter or short timeframe. Pricing evaluation is a continual process so make sure you are always evaluating what is working and what needs work.
About the Author
Bruce Outridge is a business and leadership consultant for entrepreneurs and the transportation market. More information can be found on his website at www.outridge.ca