Pricing

Pricing your product correctly is essential for attracting your target customers and shaping their perception of your business. Aligning your price with your brand and value proposition is key. For example, selling a common product like petrol at a lower price can attract high-volume sales, but may increase costs due to higher demand. In contrast, pricing at a premium can attract a different audience, such as customers with more disposable income, who may also purchase higher-margin products. Strategically setting your price helps define your brand identity and attract the right customer base.

Once you've determined the right price for your target market, ensure that it aligns with your business’s financial goals. This involves calculating all costs, including future reinvestments, and setting profit margins that make the business sustainable. A thorough understanding of your cost structure, expected sales volume, and market conditions is essential for ensuring your price point supports long-term profitability. Always factor in a margin of error to account for fluctuations and uncertainties in the market.

While discounting can drive sales, it should be approached with caution to avoid eroding profit margins. Strategic discounting, such as bundling products or offering conditional discounts, can encourage customers to buy more while preserving your margins. For instance, offering a low-cost item like a free drink with a higher-margin product can increase sales without significantly impacting profits. Ultimately, successful pricing and discount strategies balance the need to attract customers, maintain healthy margins, and achieve your overall financial goals.

Extract summary taken from my new book The Business Roadmap

www.thebusinessroadmap.co.uk