Pricing Strategies for Small Businesses
Business strategies that work. Demanding a high-end price is usually a better idea than a low-end price. The problem with offering your services for too cheap is that it immediately makes the person that is buying them think that they are getting something of lesser value. It can be pretty tricky to try to figure out how to price items correctly.
At least that is what I have found when doing web related services for different folks. It is funny to see competitors charge 3 to 10 times as much for the same amount of work and effort as I offer them. I have a hard time charging such a premium but I think it’s probably just a matter of me changing my mindset about it.
I had a person tell me recently why charge $600 when you can charge $6000. The person that paid $6000 is pretty happy and feel that they got what they paid for.
There seems to be a rule of thumb that when people don’t pay much they are never happy.
I’ve seen something similar in the car market versus the housing market. When you buy a new house you like to tell all of your friends how much you spent for it. Well, maybe not you, but some people.
The bigger the price tag, the more they are apt to feel better about themselves. However, when it comes to buying a car, people want to prove that they bought it at an absolute rock-bottom price.
Funny right? On the one hand you want to show how you paid high-end pricing for your home, but got the best deal for your car. I think what it comes down to his ego. Very expensive home makes you look good and sodas being a great negotiator. As a side, you can learn more about buying real estate. Click here.
But at the end of the day offering a truly great service for a affordable price is what I am committed to personally.
I feel like pricing is just simply a matter of time. You have to understand overtime how much you can charge for different services. You can look at a company that does mulch for example.
If you can actually come out and install the mulch for about the same price that someone would pay in a large home-improvement store per bag, then you have it made.
Of course you would still have to put the work in… So maybe you wouldn’t have it made. But I think you get the idea.
Top 5 Metrics on Pricing
If I had to list my top five thoughts when it comes to pricing your products or services correctly I would have to list these:
Ask yourself the following questions:
1. Do a bottom up calculation. This involves simply asking the question “how much does it cost for me to buy or create this service?”
2. What is the market willing to pay for the product or service?
3. What are my competitors charging?
4. How much do I need the business currently? (If you are just starting out, you may need the business a little more desperately)
5. What is the absolute minimum that I would take for this product or service?
Once you have these metrics, you will be able to determine what a fair price is. You don’t have to be higher than everybody else or lower than everybody else. You simply need to make sure that you are offering a great product or service with a reasonable price.
I think most would agree that you need to err on the side of a little higher priced.
Sometimes this depends on the industry you are in. If you are in a highly competitive niche then you’ll find that a lot of the prices are similar nature. However, if you have a high-level/unique skill-set or product meaning a lot went into the making or developing of the product or service, then you can charge a premium.
Of course, hopefully you have done your research before you have spent a ton of money developing a service or product that required a high level of skill to ensure that there was indeed a market for it.