One of the biggest challenges in business today, is the actual pricing of products or services. Lots of dedicated time and research goes into it before deciding on how your pricing should work for your products or services.
A common mistake that businesses and individuals do when pricing their products, is that they only think of pricing in one dimension. On the contrary, there are more than 5 different dimensions that should be taken into account when it comes to pricing, all in relation to each other:
- Profit: This is the first thing that comes to mind. “How much profit do we want to have?” When asking this question, you are also considering all of your expenses, from costs of production, to your marketing costs, and so on.
- Competitors: This is another dimension that plays a significant role when it comes to pricing. Research the market to see what competitors are charging and take your next steps from there.
- Customers’ Expectations: This is a dimension that needs to be heavily considered. Customers’ expectations is how your customers will perceive the correlation of value to price of whatever it is you are offering.
- Customers’ Capability to pay: Know your customers and their capabilities. You won’t be trying to promote an expensive service or product to customers who can’t afford it, or you wouldn’t charge prices that your customers’ can’t cope with.
- Market Positioning: Before deciding on pricing, think of how you want your product or service to be perceived. For example, do we want to be seen as “affordable”, or as “premium” service providers? Here, pricing plays a part of your branding.
Pricing is not an easy task and shouldn’t be taken lightly. This is where the foundation will be laid down for your business, as price reflects on your company’s core values and message. Take the necessary time, and approach it with the seriousness it deserves, always taking into consideration more than just one dimension, in order to be able to appeal to your customers, and at the same time brand yourself through it.
I hope you have found this useful. All comments and feedback are welcomed.