The US Small Business Administration estimates that over 550,000 businesses opened in 2009. After five years the survival rate for a small business in America is only 50 percent.
My father successfully ran a small business for over fifteen years when I was growing up, and determining his businesses pricing strategy was critical to his success. Prior to attending college he shared some of his insights with me.
During college I benefited by being able to apply the different business principles I was learning to real-world situations. Maybe you have always debated about opening your own business. As a new business owner, remember not to rush; a lot of planning is required to be successful. First let’s focus on your pricing strategy and business tactics.
One of the major decisions that you have to make regarding your businesses product or service offering is which pricing strategy and tactics should you choose to input into the development of your business.
In a business college the concept of price is covered within the 4 Principles of Marketing – Price, Promotion, Product, and Place. Make sure to review the “4 P’s of Marketing” to help you get a greater understanding of the other specific marketing principles.
Finding Your Pricing Strategy
A poor pricing strategy can literally make or break your business. When developing your strategy there are many different aspects to consider. Your price could vary depending on a lot of different things, including product demand, price elasticity, and so on. Since you have already identified a need within the market, you need to start looking more in-depth at your competition.
Completing a “SWOT” Analysis (Strength, Weaknesses, Opportunities, and Threats) for your business and each competitor is the simplest way to define your strengths, address weaknesses, discover opportunities, and identify threats in order to help you differentiate your business. Strategize about how your business will fit into the market and what tactics your business should be focusing on. Make sure to examine the marketplace, your competitor’s offerings and develop a spreadsheet of the different product/services including their pricing approach to analyze.
Conducting this strategic analysis will help you develop the right pricing strategy in order to determine if a higher, neutral, or lower price point approach will best benefit your business and the target market. Finding this critical point should adhere to your customers perceived value of your product, help support sales growth, and maximize business profits.
By outlining your pricing strategy and tactics before you launch into the market gives your business an opportunity to stand resolute for years to come. Every so often make sure to review these strategies you have put into place. From watching my father for many years I learned that your business will be in a constant state of change. Your businesses marketing mix needs to keep evolving in order to remain competitive within the marketplace. Embrace this way of thinking in order to stay on top of your competition and the market conditions. Your business, family, and employees will be glad you did.