The goal of every business is to make money, and as a business owner, the prices you choose for your products and services should ultimately maximize your profitability. When you price your goods properly, you’ll make the profit you want and your products and services will succeed in the marketplace. On the flip side, inaccurate pricing can jeopardize your success and create problems your business might never overcome.
Every market is unique, so it's up to you to figure out how your products and services should be priced to be reasonable for both you and your customers. It’s important to remember one thing: businesses can charge too little or too much, and still stay in business. The goal isn’t to charge as much as you can for your goods, but to find prices that promote your business’s long-term success.
To establish fair, profitable pricing, consider the following tactics:
1. Talk to your customers.
When it comes to determining the right prices for your products or services, don’t skip over your best source of information: your customers. Customers who have experienced your products or services will tell you what they think! Use their feedback to make improvements to your pricing. Take the time to send your customers a survey after they’ve purchased your products, and consider asking questions like:
- Before purchasing our product/service, did you check out our competitors’ pricing? Did their prices influence your decision to do business with us?
- Please rate the price of the product/service you purchased: inexpensive, fair, or expensive.
- Will you shop with us again? Why or why not?
Listen to your customers. If they say your prices are inexpensive or fair, you can get away with raising your prices for higher profit. But if they say your prices are too high, it might be time to reevaluate why you charge as much as you do.
2. Scope out your competition.
Take the time to research your competitors’ pricing. How similar are their products or services? Do their prices compare to yours? Do they offer additional benefits like free shipping or refunds? Are they more experienced? The more you know about your competition, the better. No matter how supreme your customer service or reliability is, people want to know they're getting a good deal. Period.
3. Test your prices.
You will never know if high or low prices will perform well, if you don't try. In order to maximize your profits, you need to take risks to find out what your customers will and won’t pay. But before making any drastic changes, do your research and be realistic. You don’t want to offend your customers with prices they can’t afford, or charge too little at the expense of your company’s success. It’s all about finding the perfect balance.
Now that you know a few ways to establish profitable pricing, it’s time to get moving! You owe it to yourself and your business to find and manage your pricing for lasting success. Remember, the prices you set will fluctuate with time, so it’s important to set goals and continually monitor your pricing.