Posted by: broshe on Jun 22, 2012
Being able to find the balance between pricing your products and services for a profit and keeping them in a range that will sell can be a tricky process. In fact, if you spend very much time thinking about it, you can feel like you are trying to balance two very large objects on a playground teeter-totter.
How do you find the balance? You must realize that, although you want to make money for your business, you need to make sure your products are services are priced to sell. If your items are priced to high, customers will become discouraged and will shop elsewhere. If your items are priced to low, then you either will not make a profit, or you will lose customers because they will think your products or services are not high quality.
There are actually some very easy steps you can take to price your products and services in the best way for your business. Follow these steps and you will be able to make the most of your company.
1. Do your research. Understanding what other businesses are doing is important. Although you will not necessarily want to price your products and services just exactly like the competition, you will want to keep them in a similar range. This way, you can keep customers from shopping elsewhere simply because of money.
Research is, by far, the first step you should take in order to correctly price items of your business.
2. Think about what you would pay. When you begin to consider pricing, you must put yourself in your customer's shoes. If you were shopping at the business, would you be willing to pay what you are asking? If you think about this objectively, you can get a better idea of just how much to charge.
If you think only of your profit and not what is feasible to a customer, you are most likely to charge too much for products and services. Be careful to not overcharge simply because you are out to make more money.
3. Do not undercharge. Just as overcharging is an easy way to lose customers, undercharging can be just as bad. Your first instinct may be to find out what the competition is charging and then price your products or services much lower.
This is not a good idea for two reasons. First, you will be drastically reducing your profit, and you may begin taking a loss simply because you are not making enough to pay the bills. Second, customers will see extremely low prices as suspicious. They may think that your items are cheap or not up to par. Make sure that you do not undercharge and that you stay in a competitive range.