How do you know when your Price is Right?

Price. A little word with big emotion.  

Undoubtedly, determining a price for your product or service is one of the hardest aspects of starting a business. Getting it right is imperative to our success. 

Remember the TV commercial with the woman running from the store yelling, “Start the Car”?

A clever commercial indeed. If you’re like me, you may have even re-enacted it a few times when the moment strikes.  

Well, that commercial was all about Price.

The shopper is obviously excited about her ‘steal of a deal’, hence her running out the door like a thief. Our customers may not react with this outward level of excitement, but we can still aim for it.   

A price will inevitably provoke a positive, neutral, or negative response.  

As small businesses, it’s on us to establish our prices to inspire a positive response – ideally, a purchase.

When I launched my first business 5 years ago, I did the work necessary to determine my prices. For the most part, my prices hit the mark. My customers validated with their buying decisions. When I launched my second business, albeit a very different product, it was much harder to determine price, and we ended up needing to make a price tweak. It’s important to remember that every tweak you make in price causes a ripple effect through your business. If you need to tweak, aim to only do it once.

As I reflect on my own Pricing journey, from early days to now, a few ‘experience nuggets‘ stand out for me. If you’ll indulge me for a 5-minute read, I’m happy to share them with you.

We are all consumers

When is the last time you shared or heard an opinion about the price of something? In our household, it’s pretty much an everyday occurrence.

Bacon. Don’t even get me started.

We are all consumers. As consumers, we have an inherent understanding of how Price impacts our buying decisions. What motivates you to buy X product at Y price, while another person passes on it? Our built-in experiences equip us to act as our own knowledge source and test centre for consumer behaviour. Use that intelligence to your advantage.   

Set aside your ego

Your ego has no place in determining your price. It’s not about you.

If you think it’s about you, you will be sadly mistaken and disappointed soon enough. If you let your ego take charge in this aspect of your business, you run the risk of under-valuing or over-valuing your offering.

Your ego will affect your ability to be unbiased in your thinking, and chances are you will under or over-value your product. And that’s never a good way to start. 

Understand Price Sensitivity

According to Investopedia, price sensitivity is the degree to which the price of a product affects consumers’ purchasing behaviours.

Most products will be affected by some degree of price sensitivity.

As a small business, it’s imperative that we understand this and how it impacts our customers’ buying behaviour and decision making. Being perceptive to our customers’ needs, as well as our Competition, and how we fit into the marketplace will help mitigate the risks associated with any variations in price sensitivity.  

Choose your Pricing Strategy early 

As a small business owner, it’s entirely on you to understand what factors need to be considered when determining your price. There are tangible and non-tangible costs naturally embedded in any product or service. Choose a pricing strategy that best suits your business. You have options. It’s not a one size fits all approach. The good news is, you don’t have to figure it all out on your own. Take advantage of the FREE tools and resources available to guide you in the process.  

Check out BDC’s article,  5-common-strategies for Pricing.

Your price will not suit everyone

Regardless of the amount of thinking you put into it, you will still have customers who say, “Oh, that’s too expensive”.

That’s OK. It will happen.

The important thing is how you react to these comments. Your reaction to nay-sayers will be influenced by your confidence in the price you set. If you are not confident in your pricing model, your first instinct might be to adjust your price. If you’ve done the Pricing work and have confidence in the price you set, you’ll let it go and move on.

It also helps to have a diplomatic response at-the-ready for any Nay-Sayers, just in case.   

Stay current. Stay relevant. 

Once your Pricing is done and you’ve launched your business, it’s equally important to continually check-in and evaluate to make sure you are still hitting the mark. As a small business owner you need to stay alert to changing conditions that may affect you, and your prices. Keeping your finger on the pulse of consumer behaviours and your competition will ensure you remain current and relevant. When you have competition in your space, you need to be aware of their pricing maneuvers as well. It’s on you to remain relevant and competitive in your market.

Regardless of what type of business and products or services you sell, hitting the mark on Pricing is critical for your success.

Don’t rush it. Take time to figure it out and take full advantage of the resources available to help you. Check your Ego, and never stop learning.

In an ever-expanding and crowded marketplace, how do you know if your Price is Right?  

With much and continued gratitude,