Many businesses price their products and services incorrectly. The problem with that is when they price too high, they miss out on potential sales and when they price too low, they miss out on potential profit.
Some tools to think about:
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, profit or both?
Most businesses try to hedge their bets and go for both, but this can be a difficult outcome to achieve. Plans and strategies need to be worked on.
Katrina Brennan, director, SRJ Walker Wayland Business Growth Advisors, Accountants and Auditors, Level 2/2 Innovation Pkwy, Birtinya, 5301 9957, srjww.com.au.
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