One of the secrets to business
success is knowing how to set
the best prices for your
products. If you set your
prices too high, you may scare
away customers and favour
your competition. If your
prices are too low, you may be
losing profits and running your business at a loss.
The best price for your product or service is one that is low
enough to attract customers but high enough to make you a
good profit.
Can entrepreneurs set prices that attract customers and
guarantees good profits? It is possible, but you’ll have to
know the strategies to apply and in what markets to apply
them.
-Value to customers;
One of the most effective strategies you can use is to price
your product based on value. The value of a product means
different things to different people. The more value a person
places on a product or service, the higher the price they’re
likely to pay for it. You may not be willing to pay N1,000 for
a bottle of water, because there is water everywhere around
you. But if you’re lost in the middle of the Sahara desert with
no water to drink for five days, if somebody shows up with a
bottle of water and offered to sell it at N2,000, you will most
likely go for it.
This clearly shows how consumers react to price when the
product holds a lot of value for them. This value could be
based on several factors such as emotions, survival, greed,
scarcity, status etc. The higher the value customers place in
your product or service, the higher the price they’re likely to
pay. It’s a natural law and a fact of human behaviour.
-Know your customer;
Analyse your market and study your potential customers
when you’re setting prices for your products or services. You
can set any prices you want, but if your target customers
cannot afford it, your business won’t sell anything. By
studying your target customers’ behaviour, likes, dislikes,
preferences, tastes, lifestyle, income levels etc, you will gain
a lot of insight that will help you to set the right prices for
your products or services.
There are three main types of customer groups you should
always consider when youfre setting prices. Price-sensitive
customers – price is the most important factor that affects
their buying decision. Convenience-centered consumers –
Those who value convenience more than everything else.
Quality-conscious customers – They will pay anything to get
the best quality of a product or service. The more you know
about your target customers, the better you can set a price
that will appeal to them. Putting your customer first is a
strategy that always works.
-Cover your costs;
To survive and succeed in business, you need to make
profit. Profit means that youfre selling your products or
services at a price that is higher than the amount it cost you
to make the product or deliver the service. Before you set a
price for your product, you need to be very sure that it
covers your costs and will make you a profit.
Apart from the cost of making a product, you also need to
know how many products you need to sell in order to turn a
profit. Many entrepreneurs just set a price that looks good
without first checking if the price covers their costs and will
be profitable. If you set a price that favours your customers,
but is bad for your business, it will only be a matter of time
before you won’t have a business anymore. You must
consider your direct and indirect costs. If your cost is more
than your price, it’ll only be a matter of time before you run
out of business.
-Competition;
Everybody who does business knows that price is one of the
effective ways of attracting customers to your product or
service. This is why you need to always consider the pricing
of your competitors. Consumers are smart; they always want
a fair price, and will always compare your price against your
competition. If a competitor’s product is cheaper and there’s
no major difference in the value of the products, you could
lose customers to your competition.
Business is a race. You need to constantly make sure that
your product or service is competitively priced, especially if
your products and services are similar to those offered by
the competition.
-Demand;
More than 99 percent of consumers only buy products and
services they need or desire. But there are times when
people are ’forced’ to need and desire certain products and
services. In such periods, the demand for these products
and services skyrocket beyond the supply in the market.
When such events occur, it’s usually an opportunity to raise
prices.
For example, during festive seasons like Christmas, New
Year and other religious and national celebrations, the
demand for food products automatically increases. Because
more people than usual will want to buy foods like rice,
chicken, drinks etc. to celebrate with their families. Also,
before the Ebola outbreak in West Africa, not many people
knew about or had used a ‘hand sanitizer’ before.
The demand and price of this gel, which is usually applied
on the hands to kill germs, skyrocketed. The huge
unprecedented demand for this product made it a highly-
priced product overnight. To get the best price for product
or service, it’s always a good strategy to target periods of
high market demand.
By targeting times of scarcity or excess demand, you could
increase your pricing as a strategy to make more profits.
These opportunities are not available throughout the year so
it makes perfect sense to exploit it the most you can.
Culled from Smallstarter.com.
success is knowing how to set
the best prices for your
products. If you set your
prices too high, you may scare
away customers and favour
your competition. If your
prices are too low, you may be
losing profits and running your business at a loss.
The best price for your product or service is one that is low
enough to attract customers but high enough to make you a
good profit.
Can entrepreneurs set prices that attract customers and
guarantees good profits? It is possible, but you’ll have to
know the strategies to apply and in what markets to apply
them.
-Value to customers;
One of the most effective strategies you can use is to price
your product based on value. The value of a product means
different things to different people. The more value a person
places on a product or service, the higher the price they’re
likely to pay for it. You may not be willing to pay N1,000 for
a bottle of water, because there is water everywhere around
you. But if you’re lost in the middle of the Sahara desert with
no water to drink for five days, if somebody shows up with a
bottle of water and offered to sell it at N2,000, you will most
likely go for it.
This clearly shows how consumers react to price when the
product holds a lot of value for them. This value could be
based on several factors such as emotions, survival, greed,
scarcity, status etc. The higher the value customers place in
your product or service, the higher the price they’re likely to
pay. It’s a natural law and a fact of human behaviour.
-Know your customer;
Analyse your market and study your potential customers
when you’re setting prices for your products or services. You
can set any prices you want, but if your target customers
cannot afford it, your business won’t sell anything. By
studying your target customers’ behaviour, likes, dislikes,
preferences, tastes, lifestyle, income levels etc, you will gain
a lot of insight that will help you to set the right prices for
your products or services.
There are three main types of customer groups you should
always consider when youfre setting prices. Price-sensitive
customers – price is the most important factor that affects
their buying decision. Convenience-centered consumers –
Those who value convenience more than everything else.
Quality-conscious customers – They will pay anything to get
the best quality of a product or service. The more you know
about your target customers, the better you can set a price
that will appeal to them. Putting your customer first is a
strategy that always works.
-Cover your costs;
To survive and succeed in business, you need to make
profit. Profit means that youfre selling your products or
services at a price that is higher than the amount it cost you
to make the product or deliver the service. Before you set a
price for your product, you need to be very sure that it
covers your costs and will make you a profit.
Apart from the cost of making a product, you also need to
know how many products you need to sell in order to turn a
profit. Many entrepreneurs just set a price that looks good
without first checking if the price covers their costs and will
be profitable. If you set a price that favours your customers,
but is bad for your business, it will only be a matter of time
before you won’t have a business anymore. You must
consider your direct and indirect costs. If your cost is more
than your price, it’ll only be a matter of time before you run
out of business.
-Competition;
Everybody who does business knows that price is one of the
effective ways of attracting customers to your product or
service. This is why you need to always consider the pricing
of your competitors. Consumers are smart; they always want
a fair price, and will always compare your price against your
competition. If a competitor’s product is cheaper and there’s
no major difference in the value of the products, you could
lose customers to your competition.
Business is a race. You need to constantly make sure that
your product or service is competitively priced, especially if
your products and services are similar to those offered by
the competition.
-Demand;
More than 99 percent of consumers only buy products and
services they need or desire. But there are times when
people are ’forced’ to need and desire certain products and
services. In such periods, the demand for these products
and services skyrocket beyond the supply in the market.
When such events occur, it’s usually an opportunity to raise
prices.
For example, during festive seasons like Christmas, New
Year and other religious and national celebrations, the
demand for food products automatically increases. Because
more people than usual will want to buy foods like rice,
chicken, drinks etc. to celebrate with their families. Also,
before the Ebola outbreak in West Africa, not many people
knew about or had used a ‘hand sanitizer’ before.
The demand and price of this gel, which is usually applied
on the hands to kill germs, skyrocketed. The huge
unprecedented demand for this product made it a highly-
priced product overnight. To get the best price for product
or service, it’s always a good strategy to target periods of
high market demand.
By targeting times of scarcity or excess demand, you could
increase your pricing as a strategy to make more profits.
These opportunities are not available throughout the year so
it makes perfect sense to exploit it the most you can.
Culled from Smallstarter.com.
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