Every entrepreneur has at one point in time struggled to come up with a competitive price for their product or service offerings. This struggle has increased because customers/clients are now more informed about prices of similar goods and services due to the advancement of technology.
A competitive price is the price at which a buyer agrees to pay when given honest information. It makes the seller a decent profit, excludes excessive profiteering and is sustainable in the marketplace without the business making losses.
Some Factors that Make Fixing Prices Difficult
1) Being a newbie:
Newbies in the marketplace are known to sell at random prices just to make sales without considering the implication in the long run.
2) Lack of Know-how:
It is the lack of know-how in terms of tracking the necessary petty expenses that makes some entrepreneurs offer their product/service at a loss unknowingly.
3) Fear of Selling too High:
No entrepreneur likes to be told “I would have bought from you but your own price is too high”, in order to avoid that, some fix their prices below the break even point.
4) Marketplace Mentality:
The myth that goods that come from overseas (Foreign) are usually of a higher quality and hence, should be more expensive and almost double the price of the local equivalent of such products.
5) Fear of Competitors:
The fear of competitors have made a lot of entrepreneurs sell at prices that are not sustainable for the growth of their business.
Some of these factors all make up a difficult phase entrepreneurs encounter in the course of doing business which ultimately helps them gain experience in the marketplace.
How to Fix a Competitive Price
1) Establishing a System that Tracks Costs:
Every entrepreneur should have a system to track all costs because when the actual cost is known fixing prices for service/product offerings will be easier.
2) Reduction in Profit Margin:
It is a matter of common sense to understand that before your arrival in the market place your potential customers already had options. Hence, to convince them to use your product/service you may have to reduce your profit margin which ultimately reduces your pricing.
3) Position Yourself as an Authority in the Market Place:
People hardly buy from producers or sellers they do not trust even at a cheaper price. Hence you have to ensure that your products are of good quality so that customers can trust you. And once they trust you price will no longer be a problem.
4) Understand the purchasing power of the Market Segment:
As an entrepreneur effort should be made to understand what your market segment can buy. This will help you offer products/services they consider affordable.
5) Brand Identity:
A lot of people pay for products/services based on the brand. Therefore, take time to build your brand by focusing on building customer base rather than profit maximization. A great brand fixes prices at premium.
In conclusion, fixing a competitive price is a continuous process that should be sustainable in every economic condition to allow an entrepreneur build a customer base which results to increased market share.