How to set the perfect customer attracting price
You’ve worked out your why, designed some gorgeous services and you’re fired up about the incredible difference you can make in your customers lives.
Then you hit the big P roadblock, what should your pricing strategies be? What price should you set?
Let’s just get over the awkwardness of talking about money right at the start. Iit might not be the popular thing to say, but we all set out to make bangers and mash (that’s cash for the non Cockneys reading this). You may love what you do, but would you do it for free? Probably not.
There are three main pricing strategies for a product or service, cost based pricing, market based pricing and using your income goals.
We will look at all three over the next blog posts, but you should use all of them together to come up with your perfect pricing strategy (one that covers all your costs, provides a profit that meets your income expectations and fits in the market).
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Why is setting the right price so important? What's wrong with the suck it and see approach, set a price and see how your customers respond?
Pricing Strategy Tip 1:
If the price is set too low then you won’t make enough money to cover all the business costs and make a profit. Entrepreneurs, especially in the early stages of their business, often undervalue their products or services. They feel that anyone could do what they are doing and so often go for selling more at a lower price. This is all about quantity over quality and can mean that not only do you not cover your costs, you also risk burn out very quickly.
Pricing Strategy Tip 2:
If you set the price too high you will price yourself out of the market and not be able to compete. If you are a luxury service or product and you want to be top end, great. But before you design your premium product or service, think about and research whether your market and your customers are able and willing to pay the price you want to set.
Pricing Strategy Tip 3:
You usually only get one chance at a sale, so trying a price and seeing the response will give you feedback but will also lose you valuable customers as they vote with their feet and find another business to buy from. So it is best to think about your pricing strategies before you start, so you can optimise the sale potential of any leads you get.
Pricing Strategy Tip 4:
The price you set sends a signal to the customer about how you value the product or service you’re selling. For example if you set your price a lot lower than your competitors customers might think that the product or service is not very good. If it is a lot higher then you need to be able to clearly show and vocalise the additional value you offer.
Pricing Strategy Tip 5:
It can be all too tempting to set your price lower than your competitors when you start just to get sales. This is a huge mistake many newbie entrepreneurs make. It is a lot harder to increase your prices dramatically once you are established. You’d do better to start with an introductory offer so customers are aware that the price will be increasing once the offer is over.
In the next post we’ll look at how to set your price based on what your competitors are doing and how you want to be viewed in the market.
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