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It is both a business and a personal decision, factoring in how much you need to earn to make a living, along with your values and marketing messages.
Your products can be priced strictly based on financial considerations, or you can use prices to differentiate your company from your competition, or send a message to your customers about quality.
Cost and Margin Your price needs to be sufficient for you to recoup your costs and to earn a little extra in profit. It should cover both direct costs, or the materials and labor that went into producing the item, as well as indirect costs, or expenses such as rent and utilities that you incur to keep your business running.
Direct costs make up a fairly consistent percentage of the price you charge. For example, if you operate a food service business, your food costs should average around 33 percent of your price and labor costs should average around another 33 percent. The percentage of your price that goes towards indirect costs decreases as your volume increases.
Competition Before setting prices, do some research to find out what your competition is charging. If your products are very similar, then a lower price can give potential customers a reason to choose yours over the other alternatives.
If your product is of noticeably higher quality, a higher price will reinforce this fact, and can even make your offerings more desirable. If money is the bottom line for you, try pushing the limits to see what the market will bear.
References 2 Restaurant Business Online: In she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.One of the secrets to business success is pricing your products properly.
Price your products correctly and that can enhance how much you sell, creating the foundation for a business that will prosper. Get your pricing strategy wrong and you may create problems that your business may never be .
Setting prices can be a very challenging part of running a successful business. You want to be competitive, but you also need to be profitable if you want to survive for the long term.
Setting the right price for your products and services is key to gaining profits, so a well thought out pricing strategy is a valuable tool to ensure business success. Setting the right price for your products and services is key to gaining profits, so a well thought out pricing strategy is a valuable tool to ensure business success.
Setting a pricing strategy: key considerations for business owners. Sep 29, · Odd pricing of products and services with digits ending in 9 ( for example) is a form psychological pricing.
Colors Another variant of psychological pricing uses different colors in advertising based on their perceived psychological impact/5(5). You can, however, use some of the same underlying pricing guidelines to figure out your costs and operating expenses plus your target profit in setting your price for services.
Factors to consider in pricing When pricing services, there is a bit more leeway than pricing products. "The .