The Advisor

PRICING YOUR PRODUCT or SERVICE!
by Robert Sullivan

Pricing means more than how much you charge. Smart customers look beyond pricing when considering a purchase. Price is important but so are delivery times, guarantees, customer support and quality to name a few.

Small and home based businesses can - in many cases - do a better job than "big businesses" in some of these areas. You should evaluate your pricing based on this fact. You're small and don't have the inertia or paperwork logjams of a bigger business. You're quick on your feet and can change direction easily and quickly.

You cannot determine prices based only on costs and desired profit margins. First step is to do a little research to get some "real world" pricing guidelines. You don't need a high priced marketing firm to help. Remember, you know your business better than any consultant. Here are some marketing research tips:

• Contact your competitors. Call, like any customer, and ask for pricing information. Quick and easy.
• Find out about competitor's costs. Use trade groups, suppliers' sales reps, former employees.
• Trade associations are a great source of pricing data. Use the library and the Internet to find these appropriate trade associations.
• Use the Internet for research! This can be your most valuable research tool. Visit competitors websites; trade associations; newsgroups. Search the Internet using any of the major search engines.
• Review catalogs that carry your product(s).

Price carefully. You might not be able to compete on price only but remember your advantages as a small business and emphasize your "quick service" or "outstanding customer service." You may be able to price higher and still win customers within your market niche.

Be careful about lowering prices just to meet or beat the competition. There are, however, some good reasons to lower prices:

• A strategy to increase market share.
• Promote a new product or service.
• Attract attention to a over stocked product.
• Encourage high volume purchases.
• Increase seasonal business (Christmas sale, etc)

• Notify your existing customers of the increase and, if possible, give them an opportunity to purchase at the existing prices.
• Try and advertise the increase along with "new and improved" products or services.
• Give the customer something in return for the increased costs. For example, free shipping with orders above a certain value.
• If possible, delay the increase for existing customers.

The biggest mistake small businesses make concerning pricing is not reassessing pricing on a regular basis. The marketplace is constantly changing making it mandatory you keep a close watch on your pricing. Raise or lower prices as necessary keeping the above suggestions in mind.

Robert Sullivan is the author of The Small Business Start-Up Guide and United States Government - New Customer!.