Discovering the ideal pricing point for your goods and services can be a challenging task for business owners. Set prices too low, and you will lose out on potential revenue; set them too high and customers might be turned off. To ensure you stay competitive but remain profitable, how can you find the right balance? Let us help you find the perfect solution!
If you are looking to maximize your business growth, our guide from eatOS has the solution. Compare the benefits and drawbacks of various pricing strategies to make informed decisions that will propel you towards success. Leverage our resources to explore different methodologies and ensure your current and future goals are met!
What is a Pricing Strategy?
As a business owner, you must consider the ideal price for your products and services. To make sure you are charging the right amount, use a pricing strategy that aligns with your type of business—be it retail, services, or food and beverage. With a customer-friendly approach, you will be able to confidently set prices that maximize your profits.
Compare Pricing Methodologies
Do not forget that setting your prices smartly can help you generate interest in your offerings. The sales figures can provide clues as to whether you have the right prices. Learn more about common pricing tactics below: Our goal is to make this as customer friendly as possible.
Target Return Pricing
If you are looking to optimize your return on investment (ROI), cost-based pricing is the way to go! To break even and cover any start-up and operational costs in one year, your annual sales need to match those costs. But if you want to make a profit, your sales must exceed the break-even amount.
Assume you spend $10,000 to fill your new business with bottles of homemade beard oil. The same logic applies whether the store is physical, virtual, or hybrid. For the first year, operational expenditures total $15,000 more. Making your goods costs $3.00. If you put the selling price at $10.00, you will make a whopping $7.00 profit for each item! To break even, you will need to sell 3,571 copies at $10 per piece. To make a profit, either raise your pricing or sell more units.
Cost- plus Pricing
The cost-plus system, also known as markup pricing, determines your selling price based on a defined percentage of the cost of producing the item. Assume you are selling frozen empanadas for $1.20 each. With a 40% markup, the retail price of the empanadas would be $1.68. The goal is to establish a formula that generates enough profit for your company to thrive.
Keystone Pricing
This strategy, a subset of cost-plus pricing, puts your retail price at exactly double the wholesale price. If you buy beaded handbags wholesale for $15, you must sell them to clients for $30. The profit margin would be an appealing 100% of the cost price. Prior to the digital shift, the Keystone technique served shops effectively. However, because of eCommerce, it is hard for a small firm to double the wholesale price. Consumers may easily browse online and get the same things for cheaper.
Competitive Pricing
Knowing the going rate for products and services like yours is the first step to being competitively priced. With this knowledge, you can see what your competitors charge and make sure you offer a fair price. By understanding the market pricing dynamics, you can price yourself accordingly, so that you do not undervalue or overprice your product.
Assume you are beginning a lawn care business and if your competitors' price is $45-$70 per hour, you may entice clients by charging $55 per hour, which is neither too "low-priced" nor too costly. Clients may migrate from other businesses to yours because they believe your pricing is reasonable for equivalent service.
Value-based Pricing
Based on your understanding of what customers are prepared to spend, here is a pricing plan. Let us breakdown value-based pricing. Before you set rates, research your market – check out competitors' methods and get as much buyer intel as possible. Get to know the amount consumers are willing to spend. With that knowledge in hand, you can confidently create a pricing plan tailored to your target market. Get your pricing right and you will be getting paid for what you are worth in no time.
Penetration Pricing
For enterprises that arrive late to a saturated market, penetration pricing may provide an advantage. Customers are drawn to things of comparable value that are less expensive. When contrasted to a market full of comparable items, your products might stand out if you sell them at a significant discount.
Conclusion:
When it comes to pricing your products, you need to make sure you get it right the first time, which means understanding what customers value and making sure that your prices reflect that. Providing a customer-friendly experience and ensuring they receive optimal value for their money is essential to fostering loyalty - because let us be real, everyone loves a good deal.
To learn how you can use eatOS POS systems and all features' apps, let us help you ease the pricing process, book a demo now.
