One of the greatest challenges of running a small business is pricing. Done right and it can yield amazing results profit-wise. Get it wrong and the results can be disastrous.
For small business owners, the challenge that comes with pricing is striking the right balance.
Here are pricing principles to live by.
- Make pricing a central part of the product development process.
How much profit a business will make is directly determined by pricing. Therefore, business owners must keep pricing in the centre of the product development process.
- Think strategically.
There is no single formula to determine pricing. Business owners must practise strategic thinking when it comes to pricing, where a formula may be used as a starting point. Then, other factors in economic conditions, perceived value, unforeseeable circumstances, etc. must be incorporated before coming up with a value on the price tag.
- Keep track of ALL costs.
Hidden costs, if left ignored, may appear insignificant at first but would later balloon up to become a hefty sum which will then be subtracted from a business’ income. To prevent this, business owners must stay on top of all costs regardless of how minor they may be.
- Use tiered pricing.
The needs and expectations of customers vary, so when they do business, there is no reason why pricing should be the same for all of them. Tiered pricing means: charging more for express services or for premium-quality products, and charging less for bulk purchases or in business relationships built for the long-term.
- Use personalised service and incentives to beat the big guys.
Small businesses struggling to compete with bigger companies should not use pricing as a strategy. After all, big companies can afford to charge less for their products or services, guaranteeing a sure win over small businesses. To even out the field, small business owners should use service offers, incentives, and other personalised bonuses to create value for their customers. Even something as simple as knowing customers by name can give small business owners a bigger edge over the big guys.
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