Three Hot Tips for Finding Your Business’s Pricing Sweet Spot
Everyone is always after that magic price for their product. What is that perfect amount that will make me the most money and bring in the most customers? If there was one magic answer I could tell you, I would certainly be a billionaire.
Pricing will likely always be a work in progress, and there are many factors to take into account, but here are some questions for you to answer to make sure you’re pricing for what you’re worth and aligning with what your customers expect to pay.
WHAT DO YOUR CUSTOMERS EXPECT TO PAY?
Take this example. If I were looking for an apartment in a certain neighborhood, I’d do enough research to find that a lot of apartments in this area rent for $1,000 per month. If I then came across that hidden gem listing that said $650 per month, you might think I’d jump for joy and ask the landlord where I should sign. But I’m much more likely to think, ‘What is wrong with this one?! Why is it so much cheaper? Maybe this isn’t the one for me.’ When it comes down to it, if everyone else is charging close to $1,000 per month in that neighborhood, then you probably should too.
Remember — perception is important. This goes for products of all types, not just apartments. People generally have expectations about how much your product generally costs, so don’t let your product be the disproportionate one on the block.
DOES YOUR PRICE REFLECT THE BRAND YOU PROMISE TO DELIVER?
Let’s say you’re selling homemade cookies made with organic and locally sourced ingredients. That means you are spending a lot of money on top ingredients and a lot of time baking love into each homemade treat. As a customer, I’m totally on board with this organic, homemade, artisan cookie, and then I see you’re charging $2 a dozen, and suddenly, I start to question whether you really are using organic ingredients or putting time in to make these by hand. How could you even cover costs when you charge that little, let alone pay yourself? If you are selling a top-of-the-line product, charge a top-of-the-line price. Conversely, if you’re selling quick grab-n-go burritos with no other brand promise, don’t charge me $10 for that burrito. Make sure your price aligns with your promise.
CHARGE BASED ON WHAT YOUR PRODUCT IS WORTH — NOT ON YOUR TIME IN BUSINESS
This one sounds a little tricky, but it is so important to your business’s reputation. And it’s a tough one because you have to have the confidence that you and your product are worth what you’re about to charge. If you have cleaned houses at another company for years and know you’re great at it, your new cleaning business needs to charge what the market will allow for these great skills.
Don’t underprice yourself because you’re new to the business world. I know we all secretly want to hug those first buyers and say, “please just pay whatever you’re comfortable with, and that’ll be great!” We want to thank them for taking a chance on us. But play it cool. Consumers will feel more confident buying from a confident business owner charging a fair price instead of wondering why you’re under-charging so much.
There is much, much more to be said about pricing — topics I plan to tackle in future posts. But, if you can avoid these common mistakes, you’ll be on your way to profit in no time!