What is Perfect Pricing?
The Key to Perfect Pricing
It can take a lot of testing and tweaking to get to just the right price point. But you can get started on the right foot by including the following five variables when setting your prices initially:
1. Actual cost.
Whether you’re selling products or services, there are back-end costs that must be factored into your price. Be sure to include materials, labor, federal and state tax payments, and company overhead in your actual cost.
2. Profit margin.
You’ll need to determine what profit margin (if you are using a profit margin calculation) will work best for you; express it in a percentage, such as 10 percent. Add this amount to your actual cost. No one can tell you what your profit margin should be. This is determined by your product, the marketplace, and cost.
Profit margin calculator:
3. Target market.
Knowing who your target market is and what price point they’ll accept is critically important when setting your prices. For instance, it’s possible to set a price that’s much higher than your initial estimates if you’re working with a higher-end market. If you are selling wedding cakes and they are high-end cakes, don’t you may price over what the marketplace will bear if they are exceptional cakes. Ask yourself, why are my cakes exceptional?
4. Competitor pricing.
Every business has competitors. Finding one that offers products that are similar to yours and determine where they are on the price scale can help you decide what prices you’ll set.
5. Your value add.
This factor might be the toughest to develop, but it’s the one component that can make the most difference in your pricing strategy. You need to determine what it is about doing business with your company that makes the real difference for your customers. If you’re not sure, take a look at your customer testimonials or simply ask your customers why they do business with you.
How do you define perfect pricing?