One of the seemingly more difficult concepts in launching a product, service, or new business is pricing. How much should I charge for what I do or what I’m selling?
While there are great depths to which one can go in pricing strategy, and varying price strategies for marketing objectives, here are a few basic considerations:
- Cost coverage – this is generally easier to figure out for products than services, but at the most basic level, you need to cover your costs, both fixed and variable. A general rule of thumb is that your price needs to cover all of the variable costs associated with the product or service, and a portion of the fixed costs. Remember, fixed costs include your overhead!
- Market position – draw up a Bowman’s strategy clock and figure out your market position on it, and those of your major competitors. On the horizontal axis, any competitor to your left should have lower prices, and any to the right should have higher prices. (There’s a good explanation of the various market positions at marketingteacher.com)
- A statistic – on average, business prices approximately 40% lower than what the market will bear.
- A concept – it’s generally easier to lower prices than to raise them.