Research your pricing
Your pricing strategy is more likely to be effective if you research 3 key areas. This research will help you to set prices that:
- cover your costs and make a profit
- compare favourably to your competitors
- appeal to your target market.
Research your existing costs
Your fixed costs may include the base cost of goods, rent, wages, loan repayments and other overheads. Remember to take into account any hidden or infrequent costs such as superannuation, insurance, licensing, adviser fees, and any professional development, training or networking costs. Your financial adviser or accountant can help you to work out your expected cash flow.
While it may be difficult to reduce costs in some areas (i.e. rent, wages) you may be able to reduce your purchasing costs if you buy stock in bulk from your suppliers. However, this strategy can be risky. Research your market thoroughly before buying in bulk to help you avoid any financial, cash flow, storage or delivery problems that may occur if you can´t sell a large number of products quickly.
Research your competitors' pricing
- What value do customers place on your benefits over your competitors? Do you have a unique selling proposition?
- How do your competitors price their products or services?
- Is the market highly competitive or are there few competing businesses? The fewer competitors there are in a market, the more each is likely to be able to charge.
- What do customers value when they decide who to buy from? (e.g. reliability, speed or cost of delivery)
Researching your competitors can be as simple as looking at the prices on their website, reading marketing flyers, or phoning to ask for a quote.
Competitor pricing comparison chart
Create a comparison of your competitors' prices by researching their pricing and typing your answers into this competitor pricing comparison chart.
|Competitor A:||Competitor B:||Competitor C:|
If your price is much higher than your competitors, and you are both selling a similar product or service, you may price yourself out of the market. If your price is much lower, you run the risk of underselling your services. Both problems can be avoided with thorough research before you set your pricing.
Research your target market
You must understand how much your target market is willing to pay for your product or service. If customers believe your prices are too high they will probably buy from one of your competitors. If they think your prices are too low they may question the quality of your product or service and buy elsewhere.
Get your pricing strategy right from the start and you will attract customers and make a profit. The best way to understand your target market is to conduct market research.
- Use your competitive advantage to help set your pricing.
- Use our market research kit to find key economic, demographic and statistical information about your industry.
- Find out who to contact to research your competitors and your industry.
- Learn more about working with business advisers.
- Watch recorded webinars to learn how to attract new customers to your business and retain your profitable customers.
- Find out how to respond to competition.