If you have the right price everything will work; customers will pay you without asking for a discount, you’ll have the right work-life balance and make the profits you want.
But, how do you set the right price?
First, let’s keep in mind that price is part of the marketing mix, so it’s something you should invest some time and energy with.
Start by focussing on your target market, not how much you want to make or how much it costs to make what you do. Customers don’t care about you or the costs, they only care about themselves.
Customers must see a profit before you can make a profit. The customer’s profit is the difference between the value and your price.
It’s key to understand that value is in the eye of the beholder, so different people will perceive different levels of value. This is why we have so much choice on services and products in the market place. A quick look on Google reveals a tin of Baked Beans can be can vary by 440% from a tin of supermarket own brand, to organic and biodynamic beans in a clear jar.
You can impact the customer’s perception in a number of ways. This means you actually have control over the price. This mindset is important because you need to see yourself as a price maker, not a price taker.
Different target markets are the basis of different business models, with different price points. To figure out which model to focus on you need to think about what you want.
If you want to employ people and completely free yourself from the business you’ll need to choose a model and price which allows your business to scale. If you are happy to work in the business and don’t want to employ many people, you’ll need to see what model and price allows you to do that and make the profits you want.
The chances are the price to scale and employ people will be lower than the price where you work in the business with only a few people.
When you know the right business model you’ll have clarity on the price. You can then work to get the highest price from that target market. So, if you have a low price you want the highest low price. If you go for a middle price point you want the highest middle price. And, if you go for a premium price you want to work towards getting the highest premium price.
Image from Flickr by Paul Mison.