Many businesses price their products and services incorrectly. The problem is that when they price too high, they miss out on potential sales.
When they price too low, they miss out on potential profit. Some tools to think about as the year progresses:
- Cost plus: this is the cost to produce the product or services, including variable expenses and overheads, plus profit (typically 10-20 per cent).
- Competitor pricing: consider your key competitors and research their pricing
- Demand based – what the market will bear. This is what your target customers are prepared to pay for your product and the activity that can shape your thinking at this step is to complete a product benefits analysis.
- Government regulations: does the government regulate the price? Is it applicable or not?
- Marketing plan/strategies: is the goal to achieve growth or profit, or both? Most businesses try to hedge their bets and go for both, but this can be a difficult outcome to achieve. Think of plans and strategies to be worked on.
Katrina Brennan, principal, SRJ Walker Wayland Business Growth Advisors, Accountants and Auditors, Level 2/2 Innovation Parkway, Birtinya, 5301 9957, srjww.com.au
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