Finding the ‘Just Right’ Formula for Maximum Business Revenue, Achieving the right pricing strategy may not require rocket science, but a single misstep could significantly impact your bottom line. The three equally weighted factors to consider are:
- Customer Perceived Value:
Defining customer value involves recognizing what purchasers gain when using your product or service. It goes beyond mere monetary value and encapsulates the enhanced capabilities they acquire through ownership. Consider a golfer who invests in three lessons, reducing their handicap by 10 – the worth of this improvement is subjective but could be invaluable. Ultimately, the buyer must feel they received “good value.” - Profitability:
While providing good value is crucial, it should not come at a loss. Businesses exist to make a profit, and while using loss leaders or offering freebies can attract and retain customers, the overall business must be profitable. Assessing fixed and variable costs, sales projections, and ensuring the pricing aligns with profitability is essential. - Competitive Pricing:
If your competitor offers a similar product at a lower price, it’s vital to evaluate the situation. Are the products truly identical? Creating a unique value proposition is crucial, differentiating your offering in the market. Understand that the best solution may not always be the cheapest; value often outweighs cost. Consider the example of a golf pro charging $60 per lesson compared to a competitor at $30. If the higher-priced pro delivers rapid improvement with testimonials to prove it, the higher cost could be a worthwhile investment.
In essence, your pricing strategy must harmonize these three key considerations: providing superior value compared to competitors, ensuring profitability, and maintaining a balance that resonates with your target market.
