The main objective of an entrepreneur, whether at the beginning of his career or already with experience, is to obtain excellent results for his investment, to consolidate, grow and obtain more and more profits. In this sense, mastering the techniques to establish prices and recognizing their importance can change the direction of the organization.
The task of setting a price for the sale of goods is much more complex than just attracting buyers and it is often a cause of headaches. With this in mind, we have prepared a post so that you can finally learn how to price your products and services. Keep reading!
What makes up the price of a product or service?
Knowing how much you should charge for your work is the result of a comprehensive analysis of essential factors. These are:
- Cost: brings together all the essential components for the manufacturing of products, from the bureaucratic part such as taxation, marketing strategies , to distribution.
- Competition: Your competitors’ prices will help you understand the dynamics of the market. Despite the freedom to set prices, the fact that there are other companies selling similar items in the same environment will force a balance belarus mobile database between them.
- Consumer: The economic situation will also have a great influence on this mission. No matter how good your products or services are, consumers are not always willing to pay the amount requested. For this reason, carefully study your target audience, their consumption habits and their purchasing power.
- Added value: all merchandise gains support when it satisfies the needs of customers. It is by adding value that the company manages to captivate its public and gain its loyalty. This relationship of trust also influences the final result.
How to set the selling price of a product?
Pricing policy varies according to the type of company and involves subjective conditions, however some actions are of general use and serve any model. Among them:
Identify your costs and expenses
The first point you should evaluate when this results in data minimization determining the value of your products or services is the amount disbursed up to the point of delivery to the consumer, such factors will directly influence the amount charged.
Expenses include general expenditures that are difficult to individualize. They are the expenses necessary for the full operation of the company, employee remuneration, marketing strategies, office materials, in short, items that do not directly contribute to the final activity of the business, but cannot be forgotten.
Costs now include more specific and divisible aspects, such as supplies, equipment maintenance, water, electricity, employee travel, cleaning materials and everything related to manufacturing.
Costs and expenses can also be classified as fixed , which do not change based on the volume produced or sold, and variable , consumption changes according to the quantity of the items.
What the entrepreneur must keep in mind is that a large volume of sales or an extensive list of clients is not synonymous with profit. There is a possibility that your products are being purchased because their price is lower than that of the competition, this can be very dangerous for the financial health of your business.
BCG Matrix Presentation Template
Leave your email and receive it for free!
Analyze the market
The topic of market conditions can never be neglected or put at the bottom of the list of priorities, therefore, before setting your price, you must observe the price that your opponents are practicing, as this also serves as a parameter for that important decision.
Generally speaking, there is not much discrepancy between the values stipulated by establishment, although they have the freedom to do so.
It is common for entrepreneurs to occasionally reach more competitive prices in certain campaigns, that is, much lower than the market price. However, what cannot happen is to turn this into a battlefield and constantly want to measure forces. It may be that they get a discount on raw materials, some special condition or possibly they are in crisis. That is why a detailed analysis is so important.
The profit margin is what gives true meaning to the existence of any company. What is the logic of charging only enough to cover expenses? If your turnover only allows for what is necessary for the survival of the company, it is time to review some concepts.
There is no recipe that applies to all types of business, but in a very simple way, profit is the difference between the revenue obtained from the sale of a product or service and the costs of carrying out the work.
However, the task of deliberating on the profit margin is not simple; maintaining a balance is the most sensible decision. What is the point of wanting to earn a lot, charging more than the competition, if your products remain stagnant on the shelves? Or reducing prices to increase sales and ruining the financial stability of the business?
How do I know if the price I paid for my services is fair?
The last step is to estimate the desired profit percentage.
Collection for services is carried out in 3 different ways:
How to set prices for SaaS services?
SaaS services have completely changed the concept of using software. The functionality of the service occurs without the need to install the program on the computer, and this market has grown by leaps and bounds in the business world.
The cost of your service will vary depending on whether the company is large and many employees use the product, whether the amount of resources used is lower or higher, and also depending on the number of elements processed by the software.
The starting point is to understand how the recipients of the service will use your product. Let’s look at some models for setting the price:
1. Monthly remuneration per user
Charging a fixed monthly fee for the client to use a series of software, i.e. pay for a package of services.
2. Remuneration for the use of customer service
It is based on the functionality that each client will have. Those who need a lot of support pay more. Here the best option is to offer customizable plans, basic, medium and premium accounts .
3. Annual remuneration
4. Cross selling remuneration
Modality that adds additional services, the company acquires a software and receives another complementary one to test it.
What are the benefits of effective pricing?
Reduce business risks
As we mentioned, a high transaction volume does not ensure financial stability, much less the success of an organization. Selling more implies increasing resources from the cash register.
When we do not set prices correctly, the risks of the business failing or suffering from market disruptions are high.
Increase competitiveness
Regardless of the niche you operate in, competitiveness is another reason to manage your product prices well. The ideal is to extract the maximum potential from resources, that is, to produce more using the minimum.
By reducing manufacturing costs, it becomes possible to create campaigns with good offers for consumers, stimulating market competition without putting the company’s financial health at risk.
Provides better results
Making a profit is not an easy task.
A dedicated leader knows all the factors that modify the valuation of his items and is able to act efficiently, using the best strategies in order to guarantee all goals.
A viable competitive business is one in which its managers work to find a balance when setting their prices, the right path to grow responsibly. Better results come with a lot of dedication and a sense of reality. Did you like our article? Now that you have learned how to set the prices of your products and services, also learn how to carry out market research to launch a product or service .
