Are your products and services flying off the shelf? If not, there could be a few reasons why. Everything from market demand, location and yes, pricing, can affect your sales. So how do you know which price is good for what you sell? It all starts with knowing what pricing models works best for you.
There are 3 main pricing models that almost every variation is based on. You can mix and match these to find the model that works for you based on what your industry and market will support. Finding out what your industry and market supports will likely require a bit of research. Armed with the model that works for you, detailed information about your target market and your location will help you price your product and service to sell. Here are the 3 pricing models to consider:
- Cost Plus Pricing is basically wholesale to retail pricing. This means you take your base cost and add a mark up to it. This requires you to, at a minimum, know what the base cost of your product or service is. From there, the markup should include a portion of operating costs and profit. This means you need to calculate how much of a markup is appropriate. This markup is called a margin. When you land on the number you think is appropriate, be sure to compare it to your competitors.
- Market Based Pricing is pricing your product or service at the same price as your competitors. Why? Because doing this removes price as a factor for your customers. Now customers can focus on convenience, location, service, preference, etc. If you have a product or service that’s widely available or doesn’t have a particular specialty, this may be a strategy for you.
- Value Based Pricing is the opposite of market based pricing. Here you can price your product or service at whatever your target market will allow based on the perceived value it provides. This, again, takes some research or a lot of trial and error, whichever you feel you want to subject yourself to! Value based pricing gives you the most flexibility. The primary cap on the price is what your customers are willing to pay. This is often best for highly sought after products, or unique products, and services that are considered quality.
Take some time to consider which model works best for you and use your local resources to get the additional research to help you price your products and services to sell.
If you found this information helpful, please share with an entrepreneur in your network.
Jice Johnson, owner of B2BThrive and BBI Professional describes herself as a mother, activist, entrepreneur, wealth builder, investor, Pan Afrikkan, blogger, speaker, coach, traveler and community member.
