One of the essential skills that most small business owners need to hone is product pricing. Launching and growing small businesses becomes difficult when healthy financial margins are developed and used by them. When businesses find the right price, it helps them to maximize their profits and increase sales.
Every small business decides the pricing for their products and services, understanding the value of time that has been invested in developing them. Prices of the products or services are higher when a lot of time and effort has been invested in their development. At the same time, high price and low-value products or low price and high-value products will leave the customers questioning their worth.
Below are five pricing strategies for a small business can use to increase its profits and secure a competitive advantage in the market.
Premium Pricing: This approach is most commonly found in businesses that sell a unique product. A comparative high price is set in this approach. The high price sets a competitive advantage, such as a trade secret or a patent.
Wholesale to Retail: It is important that you calculate all the costs of both manufacturing the product or the service as well as selling it. In this process, it is important that you clearly mention how you are selling your products to the customers. For instance, if you are planning to sell through the retailers, you have to also make a budget for the commissions. When you approach the retailers, the price at which you sell is the whole value of the product or the service. The retailers will resell the products, so it is also important that you do not compete with your partners at the time of setting your retail price.
Bundled Details: A combo offer is an option that you can use here. You can sell multiple items together at a lower price than the consumers have to pay for them if they are purchased individually. This approach is most effective in increasing the perceptions of the customers of value. At the same time, it will drive high sales for your business.
Psychological Pricing: Here, the business can use marketing techniques to drive sales. The customers are encouraged to spend money on the products and services offered by the business. One of the ways can be to promote cheaper goods to drive in more sales.
Limited Time Offs: With this approach, you can create a sense of urgency and ask the customers to buy your products or services. This can be a discount applied on an inventory to cut it down significantly.
Implement these strategies as per your business model. You can also implement some elements at a stage and change them at a later stage as per the requirements. The best approach is to observe what is needed to be done to make the best profits at the same time staying competitive in the market.
Source – Forbes