Pricing is a delicate process, especially when your small business is trying to branch out into new markets.
Setting prices too high or too low can have adverse effects on your business’s sales and profits.
With pricing perfection in mind, here are a handful of ways your business can properly price new markets:
Importance of Proper Pricing
Without proper pricing, your business risks the chance of underpricing its products and services, which results in operating at a loss.
Likewise, over pricing can quickly turn customers away, resulting in no business at all.
Based on the two scenarios above, it’s obvious why your small business should focus on proper pricing. Fortunately, there plenty of ways your business can choose a profitable pricing plan.
Learn From the Competition
One of the most efficient ways to properly price your products and services is by comparing your prices to the competition’s prices.
Researching other small businesses and figuring out what they sell their products for in like-minded markets will help you determine the most competitive and profitable price.
As the following article looks at, before you decide to shadow the pricing of your competitors, there is some advice on pricing in new markets that you should follow.
For starters, try to research businesses that are similar in size to yours. Larger companies work within different margins and operating costs, which your business may not be able to meet.
In addition, concentrate on the pricing of your competition’s most popular products.
Shadowing the prices of items that aren’t selling at other small businesses won’t do your business any good.
Consider the Margins
Proper pricing boils down to knowing your margins through and through.
Knowing your profit margins can help you set the most ideal price for your products while receiving the most optimal return.
However, keep in mind your loss margins as well.
Knowing the lowest cost you can charge for your products and services while still making a profit is crucial to your business’s success. This is especially the case when you are having an overstock sale and need to move products quickly.
Offer a New Incentive with Each New Market
The hardest part about entering a new market is attracting a new consumer base. That’s where incentives come into play.
By offering new incentives with each new market, you can attract new customers quickly. As time goes by, you can slowly introduce your standard pricing.
For instance, you can offer a limited time discount to new customers on their first purchase.
Or, you can offer a buy-one, get-one discount for one week only when entering a new market. You might not make a huge profit during this time, but you’ll gain more customers as a result.
Think Like a Customer
Just because you’re a small business owner doesn’t mean you’re not a shopper. By thinking like a customer, you can figure out the amount your customers want to spend.
Can your customers get the same product or service at a lower price elsewhere?
If so, how can your business offer more quality? Thinking like a customer will help you attract more customers with your pricing plan.
If your small business is heading into a new market, keep in mind the pricing pointers above.
About the Author: Adam Groff is a freelance writer and creator of content. He writes on a variety of topics including small business and price planning.