Pricing your products and services can be a little tricky. Most entrepreneurs want to start off with low pricing to draw customers into their business, but that may not always be the best route to take. However, you don't want to overprice your products or services and cause your business to go under before it gets started.
When you set your prices, here are a couple of things to keep in mind:
Cost of Materials
Never set your prices lower than what it cost you to produce them. If you set your prices at what it cost you to make the product, you will only break even. Breaking even is not the goal. Being a profitable business is! This is true for pricing services. Remember, your time is money too and time is of the essence, so you have to keep that in mind when you are a serviced based business.
Margins
This is the difference between the cost to make the product or the cost of the service and the selling price. Again, you want to be profitable. Your profit margins should be high enough to where you don't have to sell a large quantity of your products in order to get and stay ahead.
Competitor Pricing
Pay attention to what your competitors are charging. This is key because it will let you know what you should and shouldn't charge. If you know your product is better, then you may be able to charge a higher price than your competitors. Make sure you are researching when they throw a sale too.
Your Customer
Knowing who your customer is is HUGE. When I say, knowing your customer, I mean KNOWING your customer. You want to know their likes, dislikes, where they spend their money the most, and how much they spend and on what. This concept goes back to week 4 when we discussed researching your target market.
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