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How to develop an effective pricing strategy
Pricing strategy often presents small businesses with an eternal conundrum,[link widoczny dla zalogowanych]. Establish a pricing strategy that works for your business with our checklist,[link widoczny dla zalogowanych].
Although many companies rely on competitive pricing to gain an edge over rivals,[link widoczny dla zalogowanych], establishing a reasonable price for the services or products you offer is often fraught with challenges.
Deciding on a cost-based or value-based model should be step one in developing a pricing strategy that is line with your business goals. If you choose a cost-based pricing structure,[link widoczny dla zalogowanych], decide on the gross profit you would like to make on top of the amount the item cost. For example,[link widoczny dla zalogowanych], if the item cost $200 and you would like to make a 20 per cent gross margin,[link widoczny dla zalogowanych], you would charge your customers $240.
However,[link widoczny dla zalogowanych], if your business is less fixated on cost and more concerned with the benefits a customer will derive from your service,[link widoczny dla zalogowanych], consider a value-based model. Although this approach often relies on heavier marketing efforts,[link widoczny dla zalogowanych], the payoff is usually worth it.
Do your research
Before you set your pricing, it's important to have a keen understanding of your marketplace. Make sure you research your competitor's prices and keep abreast of promotions or special deals that resonate with customers. Keep these in mind when it comes to constructing your own price list.
Test case
Don't be reluctant to test your pricing and tweak it according to what you find. If you're in retail this is relatively easy, but other industries might have to get a little more creative. Surveys,[link widoczny dla zalogowanych], focus groups and social media are all valuable tools for gathering customer information and developing a pricing system based around the data.
Understand your point of difference
The most challenging element of any pricing strategy is to identify if it's your product or unique value proposition that sets your business apart. Once you've established your key strengths,[link widoczny dla zalogowanych], put yourself in your customer's shoes,[link widoczny dla zalogowanych], this can help give you a clearer picture of what your services are worth. Don't forget to project related costs and incorporate these into your final price.
Don't be swayed by the competition
Although it's smart to keep abreast of your competitor's rates,[link widoczny dla zalogowanych], it's essential that you base your pricing on the value you offer and not fickle market trends. If you stay true to your value proposition, your clients are more likely to respect the services you provide, even if what you charge is a little above the average.
By doing research,[link widoczny dla zalogowanych], understanding your target market and forming a suitable pricing strategy around feedback and results,[link widoczny dla zalogowanych], you can establish the ideal pricing scheme for products and services that your business offers.
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