Are you tired of not making enough money? Use these tips to make as much as you deserve.
There are so many things to look at before pricing your offer. That’s why business owners often make mistakes in that area.
To be specific, two of the most common mistakes they make when pricing their offers are undervaluing and overestimating.
Some take the conservative approach to undercut competitors in hopes of generating higher sales. Others think that premium pricing always implies high-end value and try to bait with an expensive offer.
But to get the most out of your offer, it’s important that you price it correctly. Otherwise, the reviews might damage your credibility.
Here are seven tips to ensure you’ll come up with the right price.
Tip #1 – Identify the Right Pricing Model
There are really only two staple pricing models:
Cost-plus pricing
Value-based pricing
The cost-plus model adds a markup to the cost. In contrast, the value-based scheme takes into account the value that customers place on the offer.
Depending on your business and niche, one of the two may offer a significant advantage. What’s important is to pick one pricing scheme and stick with it to avoid confusion.
Tip #2 – Learn Everything About Your Market
Some business owners simply try to match prices, thinking - or perhaps hoping - that it will be enough.
But you have to learn everything about the marketplace to price your offer correctly.
Find out what your direct competitors are charging. What price ranges are clients most comfortable with and how much are they willing to pay for premium services or added benefits?
Tip #3 – Calculate Your Costs
Whatever the pricing scheme, your costs always matter.
Don’t forget about time spent nurturing the prospective client, selling via meetings or phone calls, and preparing proposals. This should all be considered when coming up with your pricing, especially if you’re bidding for work that might not produce a recurring revenue stream.
Tip #4 – Take Taxes Into Account
Look at what you offer and how you deliver your goods or services. Are they subject to sales or excise taxes?
If that’s the case, you may have to re-evaluate your margins. Perhaps you can’t afford to charge the same amount across all regions, so you must adjust accordingly.
Tip #5 – Familiarize Yourself with the Current Environment and Future Shifts
Again, this comes down to understanding the marketplace.
You may have one price in mind for your offer. But what if the market is to move in a new direction?
Perhaps you have to change your price in order to meet new customer demands.
Tip #6 – Work in Your Upgrades
Many businesses offer standard and premium packages. So how do you price your offer correctly in this case?
Once again, you work out either the costs or value of each upgrade.
It’s also common practice to offer discounts on larger packages. Figure out if that’s something that you can offer without unacceptable effects on your margin.
Tip #7 – Consider the State of Your Business
Another way to approach pricing is from a business position point of view. For example, your offer may warrant an increase if you’re in a perfect spot to expand and grow your business.
Remember that your pricing doesn’t just affect your revenue. In the long run, it affects everything else about your business, including its viability and scalability.
However, you don’t have to compromise just to undercut the competition or to make short-term sales.
Priced to Succeed
There’s no one approach to pricing. Every business is different and segments of consumers have unique expectations.
With these tips, you can develop a more compelling offer that works for you and your customers.