For those who have already started their way to success I am happy for you and I wish you all the best. I want us to look at your pricing strategy as this is important to the success of your business.
Applying the right pricing strategy can be the difference between success and failure for your business. Get it right, and you’ll attract customers and beat the competition. Get it wrong, and you could end up either deterring customers with high prices or leaving money on the table by charging too little.
We will only look at two types of pricing that can kill your business, pricing too high and pricing too low.
Pricing too high
Even when you do everything else right, the one thing that can kill your business is high pricing. When your pricing is too high, customers may easily make the decision not to buy from you and buy from your competitors especially if your products are not different from what they are offering or if your product have a substitute.
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Some businesses are eager to make fast money. They charge too high expecting to make a 100 % profit. This type of pricing is not sustainable as it normally deter customers and instead of making profit you end up with obsolete stock. However, it is not always wrong to price too high. Pricing too high can be good in the following situations:
High Quality Unique Products
When customers are satisfied with the quality of the product they are actually less concerned with the cost. Same if they know they cannot find the same product anywhere but from you. They’re more interested in what your product or service can do for them. Many customers also believe that, “you get what you pay for.” So, if you price too low, the potential customer will conclude you don’t have much to offer them before they even dig any further. The low price will make the decision for them, which means you could lose a lot of customers if you go too low. A higher price illustrates your confidence in your product’s or service’s inherent value. If you do price high, however, remember not to go so high on the price that the customer sees your company as taking advantage of them
Know Your Customer
How much more is the customer willing to pay? If your customers are high value customers who enjoy being expensive. Then a high price is the least of their problems. As long as they get what they want they will pay. Some customers want customized products and in this case willingness to pay is more on the fact that the product is unique. Therefore, you can charge as high as you want as long as the price matches the value of the product.
Pricing Too Low
When you’re first starting out, it may seem like it makes sense to offer a low introductory price; a “market penetration” strategy. This is because you want to attract more customers and get your business off the ground. You’re also new to the market, and just unsure of what customers are willing to pay. With that in mind, pricing your product below the competition’s or offering a completely new product at a cheap price seems logical.
Prices that are too low can have a negative effect. Underpricing could also set up your brand reputation as being cheap and bear in mind that once you brand is viewed in a negative way it’s nearly impossible to change that opinion. So when you decide to charge a low price bear this in mind:
- What the market is willing to pay.
- How your company and product are perceived in the market.
- What your competitors charge.
After analyzing the above three points you will now have a clear picture of which pricing strategy to use.
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Conclusion on pricing strategy
Each business may have its own challenges and issues, but there are some common reasons why businesses struggle rather than succeed. “Pricing”. Take time to review your business carefully, and you may find that it is being negatively impacted by your pricing strategy.
The pricing strategy of your business can ultimately determine your fate. Small business owners can ensure profitability and longevity by paying close attention to their pricing strategy
Pricing it’s about the value offered in relation to what the market will bear to get that value. In addition to reflecting value, a good price ensures your ability to build and sustain your business. If done right, pricing shouldn’t draw you into any pricing wars.