There is a vast array of ways to set the prices of your products and services for your small business. Some of the more popular methods include the following:
• Examine competitor pricing and meet or beat them with the lowest price, or you can provide more value or perceived value to the service and charge customers more.
• Set the pricing based on net or gross profit margins.
Missing from these common methods of pricing your products or services is the whole idea of pricing to value. In other words, you charge based on what the product or service is worth to the customer in need. This pricing model works great for both service and product based businesses. An example of this with a service based business is a simple logo design. Your local florist might get charged $250 for a new logo design by their local graphic artist whereas McDonalds or Burger King can pay hundreds of thousands for the very same thing for their nationally branded company to top name advertising agencies for the same thing. What’s the difference? After all, they are both purchased the same exact service that may have taken the same amount of time to create. The difference is this. The logo seen by the local florist will be seen by thousands each year whereas the logo seen at a company such as McDonalds or Burger King would be seen by untold millions. The time to design the logo design itself is insignificant. It’s all about how many times it is viewed or exposed to the public eye. Because of this increased market exposure, the value is higher for the nationally exposed logo.
In business, we get to price our services and products based on the value of the problem that we solve. Defense attorneys tend to get paid more then janitors because they help keep people out of jail, and that sure means something to those facing criminal charges. Their future or a part of it is at stake. Therefore, the defense attorney gets paid quite well. That same attorney may help file bankruptcies on the side, but they cannot charge near what they would as a defense attorney. Even though they are the same person, the value of each of their services differs greatly to the customer in need.
So, when it comes to pricing your services, always consider value. It may significantly increase your bottom line!