The Price Is Right….It’s Not Just a Game Show:

How to Price What You Sell 

When it comes to business fundamentals, one of the most common areas of concern for women entrepreneurs is setting appropriate prices for the goods or services they offer. 

This is one of the biggest reasons women turn to me for advice and guidance.

While it isn’t super hard, it definitely isn’t super easy. You have to give it some serious thought, do some math, and set some goals for yourself.

Soooo…I decided I should give you a crash course on setting prices the right way the first time so that you don’t make a critical mistake right out of the gate.

The fallout from a bad pricing strategy will give you incredible pounding headaches.

If you don’t set your prices properly from the beginning, you will have two equally awful problems waiting for you.

You don’t want to undercharge or overcharge. Undercharging may devalue what you offer actually turning ideal customers away. While overcharging prices yourself out of the market entirely making it difficult to win new business in the first place. 

The first thing you need to do when setting your pricing is to decide what type of business you want to own.

• Are you aiming for the luxury market, or is your company better suited to choosy shoppers? 
• Do you want to position yourself as a specialty provider, or are you going for mass-market appeal? 

These questions are at the very core of your pricing strategy, so you need to think about them first.

Your prices will be set according to the average budget of your target customers. 

You know I love to travel, so let’s use this great example to illustrate the point – airlines.

• There are budget, no-frills airlines that are all about the cheap seats. Think Frontier and Spirit.
• There are carriers that focus on the middle–standard coach and business class passengers who are willing to pay a little more for some creature comforts and convenience. Think Southwest Airlines.
• There are also airlines that make their money on the top tier, by catering to first-class travelers with deep pockets. Think United, American, Emirates, and private jet charter companies.

Let’s talk about the budget airlines first.

They offer cut-rate tickets to people who want to pay as little as possible to get from Point A to Point B. They appeal to a very specific audience – the bargain seekers.

They’re offering one thing and one thing only to their customers…a cheap seat. It’s their main selling point. 

As a small business owner, I don’t recommend positioning your business as the low-cost leader in your industry, because there will ALWAYS be someone who is willing to charge less than you do. Instead, focus on adding massive VALUE that makes you different.

A few of the budget airlines do it well. However, there is a long list of bargain airlines that aren’t in business anymore.

Do you remember America West Airlines, Independence Air, ATA, ValueJet, and Ted? They’re all gone. Dead on arrival. Simply offering low prices wasn’t enough to keep them on the map.

So, instead of price, let’s talk about VALUE. This is where we move into the middle of the pack – and for most businesses, the sweet spot of pricing.

You strike a beautiful balance between cost and benefits, therefore offering your customers the best VALUE for their dollar.

This is where Southwest Airlines truly shines. They’ve managed to do just that. They offer their customers tickets priced near the bottom of the price range, but they also find ways to give people little perks that make them feel special.

For instance, you don’t have to pay extra to check a bag on Southwest or pay a special fee to change your flight. And their cheerful, fun-loving staff members make you feel like family.

This is one of the keys to effective pricing – always offer your customers a freebie when you’re building them a package deal, or present a token bonus gift or a personalized thank you note with a purchase.

Throw in a little something that makes them feel special. It will win you the business and help cement loyalty. And it doesn’t have to be a big thing, just something that the customer WANTS; even if that thing is only your heartfelt thanks and a bit of respect.

And keep in mind that the best part about targeting this middle pack of buyers is that there are more of them than there are hard-core bargain hunters and luxury mavens.

Most people can be convinced to pay a bit more if they think they’re getting a bit more than they’re paying for.  

However, if you are going for the upper-crust market, it’s important to go all out. These folks don’t play around. They have money, and they aren’t afraid to spend it.

Luxury market buyers expect significant returns for their investment, so you have to go big or go home. 

There aren’t many of these customers out there, but if you can reel in a few, you’re going to be in an excellent position to make serious money. These people are impressed by SERVICE and QUALITY, so it’s your delivery is critical.

Make sure they have the best of everything, and they’ll be happy. Airlines such as Singapore Air, Lufthansa, and Emirates have successfully mined this select target market.

So now that we’ve outlined the importance of establishing the proper value for your products and services, and setting an appropriate price for them, how do we actually go about doing it? Where does that math I mentioned come into play?

Once you’ve worked your way through it, you’ll have a number you can count on, and you’ll be on your way.

Until next time…