Your home business needs an effective system to price products for best results. The simple reason is you’re in business to make a profit.
Profit is the ultimate reward for entrepreneurship. And it will happen only when you can rely on the right pricing objectives.
Following are my personal collection of the key motives that should be driving your pricing policy. They are the factors that have always guided both big and small businesses in their quest to price products the right way.
1. Maximize profits quickly
Are you in business to quickly see a return on your investment? Then you may decide to price your products a bit higher for higher revenues.
However, you need to bear in mind the following.
This approach will have a fairly reasonable chance to succeed only when your product is new and unique on the market. What this means is that the product has little or no competition to contend with.
Otherwise, your plans to use higher pricing to maximize profit over a short period of time could backfire.
2. Win price battles
A home business owner might as well choose to price products in a way as to beat the competition.
Pricing your products very low could be the best option if this is your overriding motive. But remember this one thing. Using low pricing as a tool to squeeze your competitors out of the marketplace is an illegal practice in many jurisdictions.
So be careful you do not end up attracting the wrath of the law.
3. Get a foothold in a new market
Maybe you’re a newcomer to a particular market. In this case, you need to do something fast to penetrate the market so you too can have a fair share of the cake.
This is another objective that must inform the way you price products. Low pricing is a common option under the circumstances.
All things being equal, just by making your price a tiny fraction lower than the normal market price might do the trick.
4. Build a positive reputation
Do you want to look honest and reasonable in the eyes of your customers or clients?
Again, a lower or competitive price is the way to go if you’re the kind of person who places a good name and reputation above undeserved monetary gain.
Small business operators who are more interested in the long-term growth of their startups will obviously choose to price products within the scope of the existing market price.
So, now you know …
The decision regarding how to price products your small business puts on the market is not to be taken lightly. Get it wrong and you could be on your way out.
Conversely, your ability to price products correctly based on the best motives will be the greatest gift you would have given to your home business.