Pricing Strategies That Will Improve Profit In Your Small Business

Working out the price you should charge for your products and services is actually one of the trickiest decisions you need to make as a business owner.

Price too high and you could lose sales.

Price too low and you will lose profit and possibly even go out of business!

The right price is somewhere in the middle, and hopefully on the higher side.

But how do you actually work out the best price for your products and services in your business today?

Check out my You Tube video where I discuss how you can develop and implement a successful pricing strategy in your business that will improve and sustain your profit over the longer term.

See below for details on our relevant business coaching resources.

At its heart, the best price for your products lies somewhere between the actual cost of production and distribution (including an allowance for the indirect costs such as office costs, marketing costs and financing costs) and the value that the customer puts on your products and services.

We have already looked at the benefits of leveraging your Unique Core Differentiators as a way of increasing the customer’s perception of the value of your products (Module 2), and combined with the strategic marketing plan we helped you develop in Module 3, you should now have the confidence and tools to price your products and services at the higher end of that range between actual cost and true value.

Adopting a premium pricing attitude is clearly the best result for your business provided of course you can sustain customer acceptance of the higher pricing structure.

Many business owners take an ad hoc attitude to setting prices which could include rule of thumb methods like following your competitors, using a cost plus approach or simply increasing last year’s prices by inflation plus a little bit.

Lots of business owners I have worked with don’t even have a policy of regularly reviewing and increasing their prices. I know that sounds unlikely, but many people are actually too scared to increase prices. They seem to have an attitude that customers are like family and deserve to benefit from “mates rates” wherever possible. I really do hope that is not you!

You need to be much more scientific in the way you implement a pricing strategy.

Firstly – you must have a deep understanding of the true cost of producing the product or delivering the service. Combined with a break even analysis, this will give you a base level pricing structure that you just cannot fall below without affecting profitability.

You need to constantly update these cost calculations and break even scenarios and look to move your prices in response to any changes.

The next step is to use market research to understand what your competitors are charging for similar products and services and how your customers view your business compared to the industry.

You need to constantly work on creating the perception (and indeed turning that perception into a reality!) that you offer something way better than your competitors and you need to use that point of difference to convince your customers they should pay a higher price to reflect this value perception.

The secret though is to always measure and test all of your assumptions in the pricing models, understand the success or failures of marketing campaigns, stay close to customers to understand when you are reaching a price threshold and always look for ways to add value to the customer so you can creep the prices up towards the higher levels.

It is a constant balancing act, but one that you need to master to reach your profit potential.

In terms of my 5 step system for business success, the prices you charge for your products and services have a massive impact on the sales turnover and on the profit margins achieved in your business.

In that way, your pricing strategy is one of the most important keys to your long term business success. You just have to get it right!

So, go back into your business now and spend some time reviewing your current pricing levels and developing a pricing strategy that will maximise the profit in your business.

If you want more detail on how to develop a pricing strategy that is right for your business, work through the 27 page coaching manual and action plan for Module 5.

Become a full member of our coaching club today for just $15 a month and get immediate access to this and all other coaching modules – click here for membership details.

Good luck with building a successful pricing strategy for your business and I will see you in the next coaching module where we are going to look at how you can better manage cash flow.

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