Significant GPS Blog

7th: Learn the art of pricing to sell

business excellence growth marketing performance sales teams Apr 10, 2023

If you sell your products at a higher price than your competitors that are already popular and doing well, you may not get enough sales. If you price them lower than the standard market rates, you may get more sales but your profit margins would be significantly reduced.

Here are some tips that can help you avoid the common mistakes small businesses make while deciding the prices of your products/services.

Do not price your product with the intention to undercut your competitors. Prices that are ‘too cheap’ may send a wrong impression. Your prospects may doubt your quality and legitimacy.
Create a buyers’ persona so you know what exactly your target audience is, how much they will be willing to spend, what kind of pricing model will work for them, and how they like things to be sold.
Most businesses follow the ‘Cost + Plus’ pricing model. The cost is usually the money you spend on raw materials/sourcing the product, etc. The ‘plus’ are the overheads such as salary of the staff, cost of electricity, taxes, marketing cost, leases, insurance, etc. Make sure you do not miss any of the overheads no matter how insignificant they are. These insignificant amounts can become significant in the long run and affect your profit margins. Some examples of overheads that you might be skipping are the cost of searching for new staff when an existing employees leave, the cost of renewing your permits, depreciation of your property or products, money lost due to products getting expired on the shelves, consulting fees of professionals you may need from time to time, maintenance of your equipment, staff training expenses, etc.
Do not keep the same profit margins in all your products or services. Some of your services may have a very low ‘cost’ but your buyers may be willing to pay more for them. So, you can set a higher price for them.

You may use free sales pricing calculators available online but do not trust them completely. They can give you a rough estimate but you will still have to do your math.