Before You Set Your Pricing Strategy, Take These Nine Steps
Post Written By Expert Panel, Forbes New York Business Council
Whether you’re launching a new product line or a new business, developing a pricing strategy is an essential first step.
To do this, you’ll need to consider many factors, from the time and energy it takes to develop your product or perform your service, to your local market’s price points. You don’t want to underprice your offerings, but you also don’t want to price yourself too high and lose out to your more affordable competitors.
Because pricing can be tricky in large markets like New York, we asked a panel of Forbes New York Business Council members for their best tips. Here’s how they recommend developing an ideal pricing strategy.
1. Think About The Value For Your Customers
Don’t overthink it! Take your time to research the competition and your market share entry point. It is also important to remember that you can always lower your pricing strategy, but it is much harder to raise your pricing strategy. Focus on the quality of your product and creating high value for your consumers. This will ultimately justify whatever price you set and yield more customers. – Corey Lewis, 1AND1 Life
2. Be Tactical And Consider The Big Picture
When figuring out the price of your product or service, be tactical about it. Look at the bigger long-term picture. How many sales will you have to make to sustain your business for a year, for three years? Will it be possible to maintain that pricing strategy in a year and three-year run? What might impact it? Will you be able to offer discounts or promotions based on your current prices? – Nionila Ivanova, IT Creative Labs
3. Keep Reviewing Your Profit Margins
You have to figure out what your value story is because knowing your true value will help both present and justify it. It’s easy to sniff out when someone is uneasy, and having clarity brings confidence to your offer. Don’t undervalue your offering (unless it is intentional). And who wants to be the high-price provider? Find your value comfort zone—and keep looking at your margins! – Andy Seibert, Imprint
4. Understand What The Market Dictates
Charge enough to have a healthy margin, but also understand your customer and their market. Often you can get more from customer A in market A than you can from customer B in market B based on existing conditions, so know what those are. I always had a floor I wouldn’t go below, but where is the top? If I can get 40 to 45% gross margin because I know what the market dictates, I’m doing it. – Mike Luzio, The LVE Group | Self-Made Entrepreneur | Investor | Speaker
5. Know The Difference Between Value Versus Cost
When pricing your services, you always need to consider value versus cost. Value may not always be economic value—it may be intrinsic value to the client. The cost might not always be the dollar cost, but the time cost that drives your clients’ decision. It may be cheaper for them to do this, but they don’t have the time. It may be more costly for them to do it without you. – Robert Depalo, National Financial Network
6. Ask A Generous Price For What You Do Best
Avoid getting caught in the trap of comparing yourself to others with similar services. Forget them. Really analyze what you do best and ask a generous price for it. It’s OK and actually better if not everyone goes for it. You only need a select few who appreciate what you offer and are happy to pay for it. That will build your business from your strengths. – Sharon Lynn Livingston, The Livingston Center for Professional Coaching
7. Start Low And Raise Prices Over Time
Always have a competitive pricing structure. You can always raise your prices in the future, but you never want to show clients you need to lower your prices. Also, if you do a promotional price to get customers in the door, make sure the promo scales them back to your regular pricing over time. – Don Daszkowski, International Franchise Professionals Group – IFPG
8. Don’t Price-Gouge
There’s a saying: Pigs get fat, but hogs get slaughtered. Don’t try to rip your customers off and gouge prices. The goal is to offer a product or service at a competitive price and maximize sales. Gouging prices makes you look horrible and is not sustainable. People may splurge once in a while, but I assure you they won’t be back. If you offer value, that’s the thing that keeps customers coming back. – Hoda Mahmoodzadegan, Molly’s Milk Truck + F’in Delicious Beverages + BAḴT Global.
9. Listen To Your Clients
When first starting a company, you should conduct market research to evaluate how your competitors are pricing, then adjust your pricing accordingly. Do you offer a higher quality service? Then, aim higher in terms of pricing than your competitors. Are you a value product? Then, price yourself lower. Then, as time goes on, pay less attention to competitors and listen more to client feedback. – Maurice Harary, The Bid Lab
Forbes Article Link: Before You Set Your Pricing Strategy, Take These Nine Steps