Product pricing can be tricky, especially if you’re just starting a small business or launching a new line of products or a new service. You want to be able to consistently sell to your customers and develop regular buyers, but you also need to cover your costs and achieve maximum profit. There are a few key things you can do to price your products for repeat sales while still leaving your customers with the feeling that they’re getting good value.
Price to Break into The Market
When you’re just starting out, it may be beneficial to price lower in order to break into the market. You don’t have a loyal customer base developed yet, and people are more likely to stick with what they know. However, if you’re offering a notably lower price for the same items or services as your competition, then you may have people who choose you for the better deal.
Getting your foot in the door with lower prices introduces you to your first customers. When they’re satisfied, word of mouth can spread, bringing you more business. As you develop your base of regular customers, you can gradually increase your pricing over time, provided that you’re consistent with the quality of your product.
Price High and Low
There’s a strategy called “loss leader” that many diversified businesses employ. These are deeply discounted items advertised to bring people into the store, so that they purchase additional items that have a higher markup. For example, some retailers may advertise a barbecue grill on sale at a deep discount, but they increase the prices of charcoal, lighter fluid, steaks and burgers, and other related items. The customer comes in for the barbecue, but the store makes a heftier profit on the accessory items.
Understanding which loss leaders to employ successfully can vary with your market, and seasonally. Typically, your loss leaders should be something that people want. When you offer a variety of great bargains, you’ll have people return to your business knowing that they’re going to get a great deal.
Price Unique Items High
If you have a certain limited quantity of niche items, you can generally get away with a higher markup. The scarcity of some items, especially those that are currently on-trend, drives the price up. When you have something that people can’t get anywhere else, then you can take higher risks with pricing.
When you’re launching a new product line, you can set your prices higher at first, to see what the market can support. If you aren’t moving your items at the rate you need to break even, you can always offer a discount, but it’s harder to raise prices when customers get used to paying a certain rate.
Use Visual Cues
When you’re advertising online or in print, you have the opportunity to design your site with visual cues that imply customers are getting a bargain. For example, if you’re selling shirts, you can show a display of the shirts in vivid colors, with both the regular price and the sale price. Comparing a starting price of $40 with a sale price of $34 or $32 clearly illustrates the savings that customers will have and the value of your product.
Understand the Value You Provide
People become regular customers when they know that you’re providing them with something of value and they’re getting their needs met. In order to communicate the value you provide, however, you have to understand the profile of your customers and what their needs are. You can do this by creating a profile of your target customer and secondary customers. This can include their gender, age bracket, income level, and other characteristics. For example, if you’re selling tires, your target customer will be a car owner with enough money to hire a tire-changing service for their vehicle. Offering value-added services such as air pressure checks, oil checks, and brake inspections along with a tire sale enhances the value of the tires themselves.
You can communicate the value of your goods and services through advertising, on your website, and over social media. When you indicate that you can meet your customers’ needs, you can price your items in a way that encourages repeat purchases.
Exploring different pricing strategies can help boost your sales and grow your business. Not every item you sell has to be marked up in the same manner. Plus, you can experiment with value-added pricing, discounted items to entice people in the door, and fairly priced goods or services that meet your customers’ needs.