Pricing products and services

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Pricing products and services

Setting the right price for your products or services helps you maximise profits while maintaining a good relationship with your customers. Effective pricing can help you avoid the serious financial problems that may occur if your prices are too high or low - if you charge too much you may price yourself out of the market, but if you charge too little you may be underpaid for your work.

Pricing your products or services does not have to be a stressful process. Remember:

you are in business to make a profit
it is much easier to lower your prices than to raise them
thorough research will help you to establish the right price.
The right price is fair to your customers (i.e. they are willing to pay it) and your business (i.e. you cover costs and make a profit).
This guide will help you set a fair price for your products and services.

Research your pricing
Your pricing strategy is more likely to be effective if you research 3 key areas. This research will help you to set prices that:

cover your costs and make a profit
compare favourably to your competitors
appeal to your target market.

Research your existing costs

Your fixed costs may include the base cost of goods, rent, wages, loan repayments and other overheads. Remember to take into account any hidden or infrequent costs such as superannuation, insurance, licensing, adviser fees, and any professional development, training or networking costs. Your financial adviser or accountant can help you to work out your expected cash flow.

While it may be difficult to reduce costs in some areas (i.e. rent, wages) you may be able to reduce your purchasing costs if you buy stock in bulk from your suppliers. However, this strategy can be risky. Research your market thoroughly before buying in bulk to help you avoid any financial, cash flow, storage or delivery problems that may occur if you can´t sell a large number of products quickly.

Research your competitors' pricing

Ask yourself:

1.What value do customers place on your benefits over your competitors? Do you have a unique selling proposition?
2.How do your competitors price their products or services?
Is the market highly competitive or are there few competing businesses? The fewer competitors there are in a market, the more each is likely to be able to charge.
3.What do customers value when they decide who to buy from? (e.g. reliability, speed or cost of delivery)
4.Researching your competitors can be as simple as looking at the prices on their website, reading marketing flyers, or phoning to ask for a quote.

Research your target market

ou must understand how much your target market is willing to pay for your product or service. If customers believe your prices are too high they will probably buy from one of your competitors. If they think your prices are too low they may question the quality of your product or service and buy elsewhere.

Get your pricing strategy right from the start and you will attract customers and make a profit. The best way to understand your target market is to conduct market research.

  source : https://www.business.qld.gov.au/running-business/marketing-sales/marketing-promotion/pricing/research