Pricing is linked to various factors – some are business related, psychological or can be emotional. Are you a magnet for FREEBIES – offering what you sell for free to family, friends or whoever chooses to ask for your products?
How we price our products and services determines the revenue we generate for our businesses. You can price low and sell in bulk, price high and afford to be exclusive or stay in the middle and command a huge market share. It is somewhat difficult to charge for services because people put different value on what is on offer, but it can be based on the value of your time and efforts. Whereas with products, it is linked to cost of production, packaging, distribution and other related factors.
If you find yourself offering your products or services for free, it is time to reassess why you are in business and the value of what you offer.
Here are some pricing strategies you can use to determine the pricing options that will work for you:
Premium Pricing: high price for high quality products or services. E.G. high quality jewellery, luxury cars or premium subscriptions.
Penetrating Pricing: start with a low price to penetrate the market. This happens mostly during the launch of a new product or service – businesses offer a price that will generate curiosity and hopefully sales.
Economy Pricing: low price for low quality products, such as basic subscriptions, store brand products etc.
Psychological pricing: the pricing strategy where products are made to look cheaper due to a small price reduction. I call it the one penny syndrome e.g. charging £9.99 for a product.
Pricing discrimination: charge most when demand for products is highest e.g. train tickets or air fares during peak hours/holiday seasons.
Loss-leading pricing: selling cheap products to attract customers to your store with the hope that they will buy other products too. E.g. superstores price everyday groceries at an affordable price with the home that your continuous visit will ensure you buy other products too. Another example is the free opt-in offers mostly used by online businesses.
Competition Pricing: this is when you charge what your competitors are charging or charge lower to lure their customers. A good example is the supermarket price war.
Friends, family and even first time customers most times mean well but will ask for FREEBIES from you when they know they can get it. To be able to charge accordingly for what you offer, you must first ensure you set up your business to look like a business and not a hobby. Next, determine what your expertise, knowledge, experience, talent and time is worth – for services. For products pricing, take into consideration the cost of total production – from product development to distribution. This will give you a good indication of the price you should offer.
Lastly do not price yourself out of business – charge what will enable you to make a profit/revenue so you can keep your business running.
Do you need help with pricing your products or services? Have you checked out our Business Building Block Program? Support and assistance to help you develop your business and achieve your goals. Click here to find out more.
I wish you a successful business journey.
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