When I first started my business, one area I struggled with was how to set a fair and accurate price for my services. On the one hand, I didn’t want my services to be too expensive and on the other hand I didn’t want to price myself too low and run into a loss.
In this state of confusion I often found myself regretting why I had underpriced my services or scared that I had overcharged a client. Thankfully I have worked out a fair price for my services and I no longer have to go through the motions with this.
Though there is no one size fits all solution for determining your price, these factors below helped me and can help you generate a profitable price for your products and services.
1.Costs Pricing: For every product or service your business provides, there are associated costs. Start by adding up the costs incurred to generate the final output (product or service) such as material costs, labor costs and overheads.
2. Competitors Pricing: You can also set your prices by reviewing what your competitors are offering. The key element here is that you are comparing apples to apples and not apples to oranges. So for instance, if you want to set the price on a ready to wear dress using this method, you will have to establish that your competitors used similar quality fabric or accessories to make their dress.
This method also comes with the temptation to lower prices so you can beat your competition. However keep in mind that majority of customers rarely base their buying decisions solely on price. Moreover other competitors may decide to lower their prices as well leaving you in a dilemma.
3. Perceived Value: Here you set the price based on the benefits you think the customer will receive. To use this approach, put yourself in your customer’s shoes and ask what you will be willing to pay for your products and services. Think of yourself as a solution provider you’re your customer. Depending on the pain, they might be willing to pay any amount you set.
Have you had difficulty setting prices for your products or services? Please share your experiences in the comments below.