Pricing your product right is key to attracting the right customers and generating the sales you project. Experienced bookkeepers in Brisbane can tell you pricing too low will lower profits, cast a doubt on the integrity of the product, and might turn off quality conscious buyers. Pricing too high will drive away budget conscious customers and thus limiting your market. Getting the right price is not simply a cost + profit process. Pricing is a complex business strategy that can determine your success or failure.
The Business Math
The basic consideration to pricing is the business. In order for you to survive and continue operating, you have to generate profit. Profit feeds the business and helps it grow. So unless you are closing up the business, always operate for profit. The minimum amount you should sell has to cover all costs directly attributable to the product like raw materials, packaging, and storage and costs indirectly attributable like office utilities and interest expenses.
Once you’ve determined its cost, know the intrinsic value of the product. How much are you willing to pay for it knowing its value? Why are people paying for bottled water when they can have water for free? Maybe because they value the convenience, the quality, or the security of drinking labeled water. What is the quality of your product? Is it a rare commodity? Gold versus stone. Is it a necessity to your customer? People would forego slightly expensive vitamin supplements but will pay anything for prescription medicines. Factor these when setting your price.
What motivates them to buy your product or service? Are you catering to luxury shoppers or bargain hunters? Know the price your buyers are willing and able to pay for your product. If you are opening your business in the elite section of town you are likely to be catering to quality conscious consumers who are looking for the best in everything and are willing to pay the price. On the other hand, if you’re setting up shop in the middle-class part of the city, your customers would likely be price conscious. $5 will get you a complete breakfast in one neighborhood, and buy you nothing more than a cup of latte in another. The same dress can sell for $20 to a college student supporting herself as it can for $1,000 to a socialite.
How much are your competitors pricing their goods or services? How does your product compare to the competition? How strong is the market competition? If you are trying to penetrate an established market segment, you might need to offer your products or services with a competitive price to attract buyers and build your clientele. This is like opening a coffee shop in a food strip. If you have the monopoly of a unique and rare product, you dictate the price – like setting up the only coffee shop in a cruise ship. These two situation are the extremes, and the actual market can be anything between them.
Starting up a business takes a lot of learning. But a good entrepreneur should be able to determine all aspects of the business. Working with professionals and experts can contribute to your success. Considering all the angles of your business and work with people who will complement your needs. A lawyer, a financial analyst, or an experienced bookkeeper in Brisbane can help you set the most appropriate and rewarding pricing system for your business.