I know I do. I struggle to find the balance between what is fair and what the market will support. Sounds easy enough, right? So why do I live in fear of hearing those four little words—what do you charge?
It doesn’t have to be that way. Here are five simple steps to take the “pain” out of pricing.
- Do your research. Start by comparing what your competition charges. After checking out their rates, you may be tempted to lower your prices. Resist! Potential clients are more likely to base their buying decisions on “value” rather than price when choosing between similar services.
- Define your target group. Make a list of who you want to sell to and then calculate how much they can afford to spend on your product or service. This can be done by conducting surveys or asking them directly.
- Understand the effects of over and underpricing. Underpricing is often done to sell a higher volume. Businesses expect their customers will assume they’re getting a deal. This can give the impression that your product or service is “cheap” rather than the customer is getting their money’s worth. Overpricing may drive your customer to your competition. This is especially true if you’re just starting your business. You may be tempted to set your price too high. Setting your price at a point where you’ll make money only works if people are willing to pay for it.
- Test drive your prices. Once you’ve established a price point, do a test drive. Attempt to make a sale with 10 customers then ask them for their opinion on quality, what they thought of your pricing and what would it take for them to pay more for your product or service.
- Offer discounts. When trying to find the perfect price, discounts are a good way to determine if you’ve overshot and by how much without committing to a permanent price change. Add extra value by offering special features that clients will want to pay a bit more to obtain.
Using an effective pricing strategy can be the difference between success and failure. You want to make the most money and your customers want to pay the least. Hopefully, as you learn how to price your product or service, you can meet somewhere in the middle.