Are You Under Pricing Your Products and Services? By Salim Omar, CPA At Isnare.com Ezine Articles

Pricing is critical to the success of any business. In fact, many books and articles have been written solely on the subject of pricing. Far too many small businesses have thinner profit margins than larger companies because they tend to under price their products or services.

If you sell a product a low price, your company may not be able to cover all its costs or you might be leaving potential profits “on the table”. If the price is too high, there may not be any sales or enough sales to cover the business’s overhead costs.

The price of your product communicates information to current and potential customers. Customers often infer the quality and value of a product based on price. Commodities are products or services that can easily be purchased from many sources. If your product or service is a commodity, then you will have very little ability to price above the competition without adding substantial value in other ways such as additional services, expertise, or “one stop shopping”. In cases where your product or services are unique or highly differentiated, there is the potential to charge a premium price. Of course, the unique value must be communicated to, and appreciated by the customer.

I’d never want to be in a business that procured its customers with the lure of the “lowest price.” You never want to sell based upon price. Rather, you want to sell the quality, value, service, and unique benefits of your product or service.

There are a couple of things to keep in mind when it comes to pricing. The first one is to not overestimate the importance of price. Let’s assume you’ve got a great product, at a fantastic price, backed up by great service. You’ve advertised and now you expect people to flock to you? Trying to sell on the logic of product/price/service will only have you tearing your hair out. Certainly these things matter, but not half as much as the EMOTIONAL NEED your client is actually satisfying by purchasing your product or service. If you don't know what that emotional need is, or how to communicate to your client that you can solve it, then you will certainly struggle.

The second is to find a niche market. If you find yourself in a market place that does not allow price increase, then you want to look at underserved niches; specialize.

In virtually every industry, specialists earn more than their generalist counterparts. For instance, in the U.S., a general registered nurse (RN) earns $42,000 a year. But a nurse practitioner—an RN who has completed additional courses and specialized training—earns an average of $49,000 a year, almost 17 percent more. Certified nurse midwives can earn more than $58,000 per year, while certified nurse anesthetists often hit the $80,000 mark. That’s 90 percent more than a general RN! You’ll often find the same patterns in industries such as consulting, real estate, construction, information technology, accounting and law, where even just having the industry’s certification can boost your income by 25 percent or more.

The profitability of any small business is directly correlated to the prices/fees charged by the business. It is critical that the business implement an optimal pricing strategy. When my firm is hired to help a small business owner with the accounting needs of his or her business, one of the first things that we look into is the businesses’ pricing structure. More often then not, we find a hidden goldmine that was just waiting to be tapped, resulting in a surge of new cash flow and profits for the small business owner.

Published At: Isnare Free Articles Directory http://www.isnare.com
Permanent Link: http://www.isnare.com/?aid=334821&ca=Business

Important Notice DISCLAIMER: All information, content, and data in this article are sole opinions and/or findings of the individual user or organization that registered and submitted this article at Isnare.com without any fee. The article is strictly for educational or entertainment purposes only and should not be used in any way, implemented or applied without consultation from a professional. We at Isnare.com do not, in anyway, contribute or include our own findings, facts and opinions in any articles presented in this site. Publishing this article does not constitute Isnare.com's support or sponsorship for this article. Isnare.com is an article publishing service. Please read our Terms of Service for more information.