7 Ways to Price Your Products and Services for Profit
7 Ways to Price Your Products and Services for Profit
Entrepreneurs and business owners often find it difficult placing the proper price on their products or services. Some of them eventually underprice or overprice the products or services, thereby affecting the sales and the total revenue. It is important that you know how to price your products for profit, without underpricing or overpricing the products or services.
Many business owners are out of business today, and both the brand and the business are gone just because they failed at proper pricing. Are you an entrepreneur or a business owner, finding it difficult pricing your products for profit? Here are 7 ways that you can price your products or services for profit, without underpricing or over pricing.
- Calculate the Costs
Calculating the cost is the first thing you have to do, in pricing your product. You need to know the amount you have invested in the manufacturing, promotion and delivery of the product. And all of these have to be taken into consideration when pricing the products or services.
If you don’t do this calculation before you price the product, you might end up underpricing or overpricing the product which may affect your profit. This explains why business owners are advised to document all the expenses made in the business, so they won’t have a hard time calculating the costs. You can price your products based on the cost of producing the products.
- Analyze Your Prospective Customers
It might not be enough to price your products or services based on the costs, you may also need to consider the economic realities of those that the products and services are meant for, your prospective customers.
The purchasing power of these prospective customers would determine if they would see your products or services as being, too cheap, cheap, normal, expensive or too expensive. And you need to analyze this before you price your product, and be aware.
In analyzing your prospective customers, you may also need to consider the economic realities of the environment as a whole. Because often time, that IS what determines the purchasing power of the people.
7 Ways to Price Your Products and Services for Profit
- Study Your Competitors
In pricing your products or services, you also need to be aware of the price that your competitors charge for similar products or services. You can’t afford to lose your customers to your competitors just because of your pricing system.
For businesses that have associations regulating their prices, this might not be a problem, but for those who don’t have any association or board regulating the prices, you would need to consider the prices that those your competitors charge.
- Know Your Value
People pay for value. As an entrepreneur or business owner, you need to be aware of how much value your products or services are worth, and how much people are willing, or would be willing to pay for that amount of value. You can price your products or services based on this.
If you want to charge more, you would need to create more value, and to create more value, you may need to work on your product quality and the quality of your services. When your customers can identify with you, on the value of your products, or services, it doesn’t matter anymore how much your competitors charge.
When customers see this value, you also reduce your competition. Though that shouldn’t stop you from improving.
Read Also: 5 Things Student Entrepreneur Do With Money
- Consider Your Financial Goals
You also need to put your revenue target into consideration when pricing your products or services. Because for you to meet up with that target, your pricing has to be accurate. And when the revenue target is not met, it’s the beginning of the discouragement that may eventually lead you out of the business space.
To involve your financial goals in your pricing system, ensure that those goals are SMART enough, specific, measurable, Attainable, realistic and timed.
7 Ways to Price Your Products and Services for Profit
- Track the Market
After placing a price on your product, you need to keep an eye on the market, and the economic situation of the environment, to know when to increase the price or reduce it, so that it doesn’t affect your revenue and your profit.
Some business owners lose track of the market, and the level of their sales reduces drastically, eventually affecting their profit, and sending them out of business. When you don’t know when to increase or reduce price, you lose money. And the product you thought you have properly priced, eventually comes out being underpriced or overpriced.
- Monitor Customers Feedback
This is how you can track what your customers are saying about the price of your products and services, it would help you to know when to adjust to fit their purchasing power, and also not to lose them to your competitors.
There are several ways you can get customers feedback, you can tell them to send it to your mail, you can run a public poll through magazines, journals and newspapers, and you can meet these customers yourself and inquire from them directly, as long as you let them know that it’s in attempt to serve them better.
Bonus: Be Flexible
As an entrepreneur, or business owner, you can’t afford to be rigid, especially when it comes to pricing. Your prices won’t be fixed at all time, you have to be flexible enough to adapt to changes in the economy and situation of things in your environment. It’s this flexibility that would allow you adjust the prices when you should, so that your sales don’t go down and your revenue isn’t affected.
If you can apply these steps, you will be able to properly price your products or services for profit, without having doubts of either underpricing or overpricing the products or services. And you would also be able to leave your customers satisfied, and once they are satisfied, your revenue is guaranteed. At the end of the day, it’s a win/win situation for both you, and your customers.
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Serial Entrepreneur - International Business Planning Consultant - Speaker - Trainer - Author - Blogger - Network Marketing professional.
- 2018 SME Business Trainer and Coaching Advisor at GIZ for SME Loop.
- 2018 YALI RLC Online Cohort 9
- 2017 Fellow, Inspire Africa Train-the-Trainer Entrepreneurship programme sponsored by US Consulate Lagos and the Dickey Center, U.S.A.
- 2016 Fellow, Tony Elumelu Foundation Entrepreneurship Programme
- 2015 Top 50 Innovative Entrepreneurs, BET5 by Diamond Bank and EDC, PAU.
He is an alumnus of Enterprise Development Centre (EDC) of the Lagos Business School (LBS), Pan-Atlantic University (PAU). Through his training, mentoring, speaking and coaching programmes, he has empowered many young people over the years to start and grow their own business, build wealth, create multiple streams of income and achieve financial independence.
- He is a Certified Trainer in Design Thinking by the U.S Consulate, Lagos and the inspire Africa Entrepreneurship Institute.
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