Management – Pricing Your Product or Service (continued)
Pricing Your Product or Service (continued)
Changing prices should be handled with care. Regular customers are familiar with your prices and if costs suddenly surge there may be a reduction in sales. If you have to change prices, remove the old price tags and relabel.
Customers look at price but see value.
Shoppers may be looking at prices, but they are seeing value. Offer products/services across a spectrum of values (i.e., extras cost more). The automotive industry provides a classic model of this merchandising approach: a base model with the price rising as features are added. This approach connects the purchaser to your value proposition. Power windows, heated seats and a high-end sound system are available on some models but does the consumer perceive them as having value for them?
Once in a while, you may have a unique or trendy product/service or perhaps you supply products/services associated with special holidays such as Christmas, Chanukah, Valentine’s Day, special events such as weddings, etc. These times may allow you to price on a value-added basis rather than cost-plus-markup because the clientele’s perception of what is needed gives them permission to spend more than they would if they were just making a simple everyday purchase.
Know Your Customer Base
Pricing products and services should not be a mechanical process. Owner-managers should examine their entire product line, determine their customer base and the product/services expected, and identify the special events that appeal to the environment they service. Knowing your customer base allows pricing to be in line with your market and customers’ expectations. This will ensure your business will be able to cover all operating costs and secure a profit sufficient to allow it to remain in business for many years to come.
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