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As with everything, it does not take rocket science to get this right, however one slip could seriously damage your bottom line.
The three factors of pricing, equally weighted are as follows:
- Your own costs and profit requirements
- Your competitors’ prices for identical products
- Your customers’ expectations and calculation of value
What follows below, is a set of values you should find out before you get to the final price you will charge:
- Pricing Minimum – you will get this from your accounts by summing up all the costs (both variable and non-variable) needed to deliver a particular offering to your customers.
- Competitors’ Price – for information about your competitors’ prices, you might want to get do a bit of analysis of the market.
- Value Perceived by Customers – if you have time, you could do an overall survey among your customers, asking how much they value your services – how much would they pay for particular products if they could set the price. If you don’t have time to do exhaustive research, try to at least ring a few customers and get their views.
- Final Price – with the data you got so far, you should be able to decide whether you will change your price or not.
Now you can see the gaps for possible increase in how much you charge.