Pricing is one of the biggest questions for businesses that are new or launching new service or product line. How do you strike the right price? It’s not as simple as covering your costs and checking out competitor’s prices.
Your price should reflect your value. Just covering costs and having a little profit to show for your hard work isn’t enough. That approach doesn’t recognize the value that distinguishes you from your competitors.
Pricing boils down to three elements: Cost, Competition, and Value
Start by figuring out all the costs you need to cover, both direct and indirect. Direct costs are usually the most obvious, like materials and labor. Indirect costs, like rent and marketing, also need to be recognized in the total cost per service or product. Consider recovering the cost to replace equipment that will wear out within three to ten years.
Once you know your costs, check out the competition to get some perspective. Take care not to use competitor prices as your only guide. You don’t know enough about how the situation or profitability. Does your market have unmet demand? Competitive pricing and great customer service create market presence and capture market share.
Should your price reflect your superior quality, experience, credentials, or team? Absolutely! Don’t hesitate to charge more than the competition as long as you can distinguish your service or product from the others. Identify the qualities that create more value to your customers and reflect them in your price structure.
Pricing your service or product should consider Cost, Competition, and Value. Identify your value proposition and make sure that Your Price Reflects Your Value. Deliver more value to your customers and earn that higher price!