To find the optimal price point for your services and products, you need to know a lot more than how much it costs you and what your competitors charge, the Entrepreneur.com article \u201c10 Questions to Ask When Pricing Your Product\u201d explains. Ask yourself these questions to decide if your pricing could use some work:<\/p>\n
What is the customer willing to pay for my product?<\/b>\u00a0Many businesses make the mistake of basing their pricing directly off their cost for providing that service or product (i.e. \u201cIt costs us a dollar, so we should charge two.\u201d). Instead, start by deciding how much customers are willing to pay.<\/p>\n
What kind of customer do I want to target?<\/b>\u00a0The answer to the first question depends largely on this one. Do you want to cater to more clients at a lower margin, or make more money per client but limit the size of your market? Ideally, you\u2019ll be able to identify different price points, segment the market, and maintain both types of customers.<\/p>\n
How should I react to my competitor\u2019s prices?<\/b>\u00a0Your prices shouldn\u2019t revolve around your competition\u2019s, but it\u2019s certainly a consideration. First, honestly identify if your overall experience is better or worse than the competition. If it\u2019s better, decide how much and price upward. If it\u2019s worse, price downward. And whenever the competition adjusts prices, think about how it affects you and decide if you need to react or stay put.<\/p>\n
Can I offer different levels of products or services at different price points?<\/b>\u00a0It\u2019s always best to offer options. With different price points, you can still bring in the cheap crowd, but not miss out on the big dollars from those willing to pay for the best of the best.<\/p>\n
How can I adjust my prices?\u00a0<\/b>Different customers are willing to pay different amounts for the same services, and even the same customer\u2019s willingness will vary based on the purchasing occasion (in-season, off-season, etc.). Pay close attention to customer buying habits to determine when, and for whom, to adjust prices.<\/p>\n
Have I given the customer a reason to pay more for my product?<\/b>\u00a0If you want to charge more for a product or service, it\u2019s your job to make sure the customer understands and values the difference between the lower priced option and yours. The difference may be based on pure value, or something more intangible like the environment and overall experience you offer. Just make sure it\u2019s obvious to the customer.<\/p>\n
Can I base my price partly on intangible benefits?\u00a0<\/b>As mentioned above, sometimes your differentiation can come from intangibles like great service, environment, and overall customer experience. These elements are often more apparent to customers than having the best equipment or products.<\/p>\n
Should I bundle my products for a single price?\u00a0<\/b>Bundling products and services together for one price can be good for both buyer and seller: The customer saves a little money on each product, and you\u2019re able to make a larger sale.<\/p>\n
Should I discount to get people to buy my product?<\/b>\u00a0Promotions can be good, but don\u2019t overdo it. If you have to regularly discount products and services, there\u2019s probably a larger problem that you need to address. And once customers get used to a discount, they won\u2019t be happy about paying full price again.<\/p>\n
How does the customer want to buy my product or service?<\/b>\u00a0Make sure you have strong options for customers that want to pay for individual visits, as well as those that want membership. Both types of customers are valuable in their own ways. But, assuming you\u2019d prefer to sell memberships, you\u2019ll have to make that offer attractive enough to secure commitment.<\/p>\n