Wyoming Business Tips for Jan. 18-24
A weekly look at Wyoming business questions from the Wyoming Small Business Development Center, part of WyomingEntrepreneur.Biz, a collection of business assistance programs at the University of Wyoming.
By Michael Lambert, Wyoming Market Research Center manager
"I have a great product, but it is not selling. How can I tell if my pricing is correct?" Norman, Ten Sleep
Pricing is a vital part of marketing a product. It is generally considered one leg of the "4 Ps," which are product, pricing, placement (location) and promotion. If any of these legs is weak, then the product will have a much lower chance of succeeding.
How do you know if your price is right? Too many businesses look at only one factor. Some look at what it costs to make the product and then mark-up from there. Others may look at what competitors are charging and match that or look at the profit they need to survive and price accordingly.
Which is right? All and none of them.
Now that you are confused, the real answer is to look at all these things when setting prices. Understand what competitors are charging to be sure your price is competitive. However, do not forget to look at the total price picture. What things are different from your competitors? Is your product superior? If so, how? Are your terms different? What is the value or cost to the consumer of those differences? If you offer free shipping, then your price can be higher than a competitor's who doesn't.
You also need to know exactly what your product or service costs you to make or provide. This is not just the physical components, but also the cost of your operation. If the price is to cover the dollars to pay for components, you will not cover the cost of salaries, marketing, store rents, etc.
I recently had a client with a superb product that was across the board better than anything on the market. He priced the product at the same level as a competitor who had an inferior product. After we talked, I suggested he try raising his price. He resisted, but after thinking it over he talked to someone else in his industry, who told him the same thing. He raised his price and sales volume did not change. By properly pricing his product, he is selling just as many units as before and is making substantially more money on each unit sold. Today, his business is profitable.
It is vital to the success of the business that you properly analyze pricing for each product to ensure maximizing the potential sales and profits to the business.
For more information about pricing, the services of WyomingEntrepreneur.Biz or the Market Research Center, contact Mike Lambert at email@example.com.
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The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194, e-mail firstname.lastname@example.org or write 1000 E. University Ave., Dept. 3922, Laramie, WY 82071-3922. Additional help is available at the WSBDC Web page at www.wyomingentrepreneur.biz.
Posted on Monday, January 12, 2009