A. Pricing is a topic that a huge number of SME’s struggle with as it isn’t really an exact science – it really is part art and part science!
There are a number of factors you need to look at when pricing for the first time or reviewing the pricing of existing products/services, a small number of which are outlined below:
Know your customer:
Undertaking some market research can give you a great indication of what your target market feels about the value of your products/services.
This can range from informal surveys conducted in-house to employing the services of independent third parties albeit this can be an expensive option
Know your costs:
The cornerstone of any pricing exercise is knowing your costs and ensuring that your sales price reflects this plus a profit margin.
Many small businesses can easily identify the direct costs but often forget other overhead costs like rent and insurance which need to be factored in.
Excluding these can lead to under-pricing which in turn leads to losses and potential business failure
Know your competition:
You need to know what your competitors are charging and how you compare to them – you can take it that your customers certainly will!
This doesn’t mean that you cannot charge more, it just means that if charging more you must be able to display the added value/benefit of your product/service to the market.
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