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You’ve got the idea for an awesome product that people can’t do without. You have the supplier who can deliver products on a reliable schedule. You’ve set up your accounting software to track your expenses and sales. You are almost ready to open your small business doors.

So what is holding you back?

You may have no idea about what price to set for your products. Price your products too high and customers will go to your competition. Set your prices too low and you won’t cover your business overheads as customers will be suspicious about the quality of your products.

Creating a pricing strategy: research the market

The market segment that your product will be placed in will offer data that you can use to determine the best price. From finding out the current established market price for similar products to learning how customers rate your product based on its value, these are just a few of the details gleaned from market analysis. Look at what customers are willing to pay for the product and how much of a long-term success it will be at that specific rate.

Check out the competition

You need to understand how your competitors post their prices. Figure out who the competition is and the products they sell. Compare how your products stack up to their items, what key features their products offer, and what type of competitive edge your items have over the competition’s products. Having these answers will allow you to understand if you can charge more or less for your product to garner customers’ attentions.

Developing your pricing strategy

With market analysis and competitor data, you can sit down and figure out what prices you can set for your products. Here are three tips that can help you develop a solid pricing strategy.

  1. Sit down and go over the bookkeeping with an accountant to determine your actual overhead costs. Then you can determine what your gross margin has to be to pay for all costs while turning a profit. Then you can ensure that you are not under-pricing your product.
  2. Figure out your cost benchmarking, which is where you check out what your costs for products and production processes are as you compare them to industry standards. If the industry averages for gross profit and net profit are off from your figures, then your prices may not be set right or your operational costs are too high for your industry sector.
  3. Your positioning of the product is important. If you have a luxury product, customers expect for the costs to be higher. The same tactic is true if you are offering discounted products at lower prices. People do understand that they get what they pay for, and will pay higher prices for products that they know are higher quality.

There are numerous pricing tactics that your small business can use. You can use introductory discounts for new products to get customers interested in your business, offer varying prices throughout the week based on customer demand, and provide bundled pricing when offering additional products at one cost.

The most important strategy when setting prices is to always periodically review your set price and change it according to the market trends so you make the most money.

Marc O'Dwyer

After completing a Graduate program in Marketing, Marc’s impressive sales career began at Allied Irish Banks, Pitney Bowes and Panasonic where he received numerous Irish and European sales performance awards and consistently exceeded targets and expectations. In 1992, Marc’s entrepreneurial spirit led him to set up his own business, Irish International Sales (IIS). Initially, this company was a reseller for Take 5 Accounts and Payroll software. Within four years, IIS became the largest reseller of Take 5 in Ireland, acquiring four other Take 5 resellers. He also found time to set up two mobile phone shops under the Cellular World brand and a web design company offering website design services for small businesses. In 2001, he bought the majority share in a small Irish software business, Big Red Book. At that time, the company was losing money. The company became profitable within two months, and Marc then acquired a payroll company to compliment Big Red Books Accounting products. In 2003, IIS were appointed as Channel Partners with SAP for their new SME product, SAP Business One. Marc sold his Take 5 business and concentrated on developing this new market for SAP As a result, by 2007, IIS was recognised as the largest Channel Partner for SAP in EMEA (Europe Middle East and Africa). In 2008, the IIS Sales Manager bought the Company from Marc in an MBO. He launched Big red cloud in June 2012, the online version of big red book, to date the company successfully converts 59% of trials into sales and the number of customers is growing rapidly. Marc continues to run both Big Red Book and Big Red Cloud which now support 75,000 businesses. He is a very keen sportsman, having played rugby for 20 years, represented Leinster at under 16 and under 20 levels, and league squash with Fitzwilliam Lawn Tennis Club for 10 years. Marc has competed in 11 Marathons, including the London and Boston Marathons, and has completed several Triathlons and Half Ironman races. He has also completed six Ironman Races in Austria(x2), Frankfurt (Germany), Nice (France) , Mallorca (Spain) and Copenhagen (Denmark)

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