How Do I Price My Products and Services?

After opening her small business, owner S. Palmer of Get The Connection, wondered how to price her products and services. If you are in a business already or just starting one, you may be struggling on how to price your products or services.As you may know, price depends on supply and demand. A strong demand with low supply can command a high price while a strong supply with a low demand can lead to lower prices. A good business model will include a range of products and services as well as pricing to give your preferred clients/customers a choice.There are a variety of reasons why a company may price a product or service at a ridiculously low or high price; but, on average, you want to price your products or services so that you make a profit for your business.Consider these factors when pricing your business products or services:o Research Your Competitors. Study your competitors. If they have products or services comparable to yours, review their products and think of ways on how you can command a higher price.o Consider Your Hard and Hidden Costs. Factor in hard costs (production costs, cost of materials, utilities, marketing costs, space rental, etc.) and remember to include the hidden costs, such as the amount of time you can collect your accounts receivables. If your clients purchase your products in installments or after 30 days, then charge a higher price. You could have invested that money and could have earned an interest if you collected it earlier. The interest income is the hidden cost.o Test Your Market. Know the marketability of your product to know its demand. Test it first with your closest clients. Offer a free trial in exchange for their feedback. See if they will also provide early testimonials for your product or services to be used in early promotion of the product. As your product or services grow in demand, you can slowly increase its price.There are many pricing strategies to consider based on the type of business. Some of the more popular ones include Prestige Pricing which is used when location, exclusivity, or unique customer service justifies the higher pricing. Psychology pricing is used when prices are set at a level where the consumer believes the price to be fair. The most common is called Odd Pricing that uses figures ending in 5, 7 or 9. If something is marked at $8.95, consumers tend to round down to $8.The key is also to remember that marketing your products is just as important (and often times more important) than your pricing strategy.