Today's post is by guest blogger Kathy Cady who writes for the website How Much Is It. When she isn't writing guest posts, Kathy is helping consumers around the globe find out how much things cost.
If you're thinking about starting a business, or if you already have, you probably already know that you're going to have to have a pricing strategy. To get you on the right path to pricing success, here are four methods that seem to work for most businesses out there:
#1 Pricing Bases on value
You really have to step back and look at what you're selling and value it accordingly. For example, let's say you own a steakhouse. Since we all know that there are many kinds of steaks, you will want to price each item properly so to not mislead your customer. If you charge the same price for a choice and prime steak, it's probably going to annoy your customers, because people know when they are getting the best bang for their buck.
#2 Price based on benefits
Customers love benefits no matter what type of business you own. Let's use the steakhouse example again. If you were to group a steak dinner with an appetizer, dessert and a drink, as a bundle for one price, people would see that there are benefits to ordering the bundle as opposed to ordering each item separately. When you package items together like this, you can obviously charge accordingly, but many customers will see this “benefit” as a great value. If choosing this price strategy, make sure you upsell these benefits so the customer sees the value right away and know they are getting the most for their money.
#3 Don't forget price features
Think of how many items sit on store shelves. This could be because they need more features, or additional items added to increase their value. For instance, think of a child's toy, many of them take batteries, which would be an accessory to the original product. Carry this idea through the entire toy store and you’ll find there are many additional accessories you would benefit by selling togewther. If you're going to sell items that need to have (or could have) accessories, consider selling them separately, as add-ons. This not only brings the customer back, but encourages them to purchase more. It’s also a good idea to stock these items near each other. If customers see batteries right beside the toy display, they are more likely to grab a pack. This works on websites as well. For example, a flower and gift basket site like Bloomex will show the customer addons like vases, cards, and candy after the original purchase is selected but before the checkout process.
#4 Leave room for pricing error
No matter what market you're in, there are always going to be competitors. So always make sure you leave room for error when pricing your items. To do this, make sure you know the overall cost of the item – if the full cost of a steak dinner is $3 then you may want to price it at $14. This gives you room to decrease the price when the economy is in a slump or if you want to have a sale. Remember, customers love to see lowered prices as opposed to prices that increase.