Pricing of Products or Services
Whether manufacturing a product or providing a service what price it finally is, together with how many are sold determines the turnover of the business, and the difference between that final price and how much it has cost you to make or provide is the difference between how much profit or loss the business makes. So the eventual price it sells for is the most important decision that is made. The final price also determines whether the product or service will sell, the art of getting it right is a skill also, too cheap or too expensive the customer may not buy it.
Customer service is touted as the most important item for any business today, and it is important and should not be overlooked but unless that product or service sells, there are no customers and therefore no customer service is not required.
So what is the art or rules of pricing? Well if you have a crystal ball that might help, but realistically it has to be done by carrying out a few simple tasks.
The most important of which is market research. Research the existing market, what are competitors doing, what are they providing and what are they charging their customers. Now this doesn’t mean price matching, a better product or service can command a higher price, the purpose of the research is to stop under or over pricing.
The next step is to look at the costs to you of providing that product or service. There are overhead and staff costs to be taken into account, as well as the cost of advertising and promotion, while with a product there are the extra costs of materials.
The pricing structure has to cover these elements otherwise no money is made and the business cannot function. Also be realistic the higher the price the less that has to be sold, the lower the price the more that has to be sold to make the same income, so the manpower and promotion budgets that can be afforded has to be considered.
Be aware that a lower price may not command a wider audience, only scepticism that perhaps what is on offer is not as good. A FREE promotion is not always a good thing as most want to know what the catch is.