Attaching a fair and accurate price to your products and services can be a tricky balancing act. It should come as no surprise that many business owners have an ongoing struggle with their pricing strategies.
Customers want the best value for their money. They will always do a quality comparison where possible, and make purchases based on the best price for the best value.
When setting prices, remember this golden rule: perception is everything. How customers view your product or service and what they are willing to pay for it is based upon those perceptions.
Your products will be perceived as high-, moderate-, or low-priced, usually compared to your competition or to your customer’s own notion about what “something like that should cost.” There is no danger in having the price of your products perceived in any of these ways. It all depends on how you are perceived by your target market. For example, being known as “moderate-priced medical-care insurance provider” might make some customers nervous and think they are getting cut-rate service. The point is to match the perception of your price to the perceptions of your customers.
To further illustrate:
- If your customers are motivated by value consciousness and your product is generally available, price and value are important to your customer. Keep this in mind when setting your prices.
- If you sell luxury products that are exclusive to customers who value innovation, a perception of underpricing may actually work against you.
Pricing is all about knowing your customers — what they want, what motivates their purchases, and how they feel about the products, services and features they are purchasing. Ask yourself and even your customers the following questions to help determine how your products and services are being perceived. The answers may surprise you.
1. How do my customers perceive my product or service, in terms of price? In terms of value?
2. How does my price compare with my competitors’ pricing?
3. What values and benefits do my customers get from my product or service?
4. Are my prices consistent with those benefits and values?
5. What is the current supply-and-demand of my product or service?
6. Am I in an industry where the demand for my product or service has a short life cycle. Do I need to cash in quickly?
7. Do I have a product with a recognizable name that allows me the luxury of overpricing?
Linda Hunt delivers simple, practical strategies for creating systems and structure that create stability helping business owners to grow their business and earn more money. For more FREE tips like these, visit her at sumsolutions.com