Marketing Tips – Small Business Pricing

Pricing is a key determinant in the decision making process customers use to purchase your product or service as well as a key element in determining the profitability of your business. Setting a price for your product or service that appeals to your target market and encourages them to buy is therefore an essential part of your business and marketing strategy.

Before determining your pricing strategy for your business it is important to consider the following:

Your Customer

An effective marketing strategy begins and ends with your customer. It is therefore important to establish how much your customers are willing to pay for your product or service, how sensitive your customers are to changes in price and how price discounting will affect the level of demand and profitability of your business.

Your Product or Service’s Features and Benefits

Unless you have a product or service that offers a unique or additional benefit, and you can communicate this benefit adequately to your target market, if your price is too high you may price yourself out of the market. Look at the features and benefits your product or service offers and how they compare to your competitors. Remember the benefits you provide can either be physical, emotional or both. For example, some customers may see a high price as equalling high quality and are therefore willing to pay a premium.

The Cost of Doing Business

Before setting your price you need to determine what your small business must charge for its product or service in order for you to make and sustain a profit. Look at what the cost and expenses are of doing business and what price you will need to sell at to ensure these expenses are covered. Unless you have a sustainable cost advantage, if your price is too low, your sales volume may not generate enough revenue to cover the costs associated with your business.

The Market and Your Competitors

Your competitors play an important role when setting your pricing strategy. For example, there may be competitors nearby where customers can compare prices so you may need to price match. If it is hard for your customers to compare prices you may be able to charge a premium.

Distribution Channels

Some customers may expect to pay a different price for a product or service depending on which distribution channel they use. For example, if a customer purchases a product over the internet or by mail they may expect to pay a lower price due to the elimination of the middle person i.e. the retailer.

Life Cycle of Your Product or Service

At different stages of your product or service life cycle you may change your pricing strategy to suite your business needs. For example, when you are launching a new product or service you may adopt a low price strategy to encourage trial and repurchase of your product/service on a regular basis. Alternatively if your product or service has a unique point of difference or high cost of production you may charge a premium over your competitors. As your product or service grows in customer awareness and credibility you may be able to sustain a price increase. Alternatively as sales increase, your production costs may be reduced and you may be able to pass on some of these savings in a price reduction or regular promotional offers.

(c) Marketing for Business Success Pty Ltd 2008

Small Business Banking

As a small business owner, you will want to focus on banking features that are available, useful and help you realize success with your company. Each financial institution offers unique small business banking programs and packages. There are free business checking accounts, business savings accounts, loans and credit card services as well as online features from credit unions and banks to consider while conducting business. You will want to become familiar with their products so you can choose which will work for you and your business.

When looking at the selection of credit unions and banks, you will see many types of small business banking services that can meet your needs. Some credit unions and banks offer free business checking accounts, while others require a minimum balance. You may need after hour depositing and many small business banking programs include this. Most banks and credit unions offer a debit card or check card with the opening of a free business checking account. This can prove to be a convenient and efficient way to make purchases for your business. You may have an option of an unlimited amount of transactions when you start a free business checking account with your credit union or bank. Check with your financial institution, as there may be limits on usage and account balances.

You will have plenty of options when you open a business savings account. Overdraft protection can certainly be useful when you use your business savings account to cover any overages by your business checking account. Your business funds can earn money with an interest bearing savings account. Each financial institution will set their terms for the amount and the length of the deposit for this type of business savings account. CD’s and money market savings accounts are offered as another source of generating money with your business savings account.

Most small businesses need capital for start up, growth and expansion, and even help through lean times. Credit Unions and banks offer loans and even business credit cards to cover these needs. Many small companies take advantage of business credit cards for convenience and flexibility with their working capital. An example of this would be when using your card to cover the gap in payment for goods and services that your business has invoiced. Small business loans can be an essential element for expansion in the event that you do not have the capital to cover the cost of growing your company. While you can’t predict the future, knowing that your business can take on a loan to assist you through difficult times can put your mind at ease.

Small business banking has grown with the digital age and most banks and credit unions now extend online services to their business customers in addition to free checking and savings accounts. Such services can include taking of care of your accounts payable online, monitoring free business checking and business savings account activity, receiving account alerts at your email or mobile device, bill payment and transferring funds between accounts with the push of a button. Statements through the mail can literally be a thing of the past with online banking. Online small business banking services even allow for the use of accounting software such as Quicken® or Microsoft Money® so that your financial picture can be managed with great ease.

Key Small Business Tips for Success

Small business tips for starting your own business can put you on the path to financial success.

The SBA says that the term small business includes concerns that are organized to make a profit and have fewer than 500 employees. In this post, small business includes work at home, affiliate marketing, network marketing and online home based businesses, and I will explore small business tips to help you achieve your business goals. These tips will help you get customers and generate more sales quickly.

Here are key small business tips and questions to consider:

1. Why do you want to start a small business? Starting your own business requires commitment. So, don’t proceed to do so unless you are prepared for long hours and frustration while you are establishing your business. For many, enduring this is well worth the potential of financial security.

2. Will you market a product or service? A service business is one where you offer your expertise to clients. For a product business, you will need to offer a tangible product. Typically, a product business is more expensive to launch than a service business.

3. Do you have a simplified business plan? The thought of writing a business plan is intimidating to most aspiring entrepreneurs. However, it is possible to write a one-page plan that tells the what, who, how and where of your business. You should keep it simple. You can add details as you go. Just get it started.

4. Who is your customer? Describe your target customer in as much detail as possible. Know their needs and wants. Know how you can provide a solution to their problem. This profile will help you create a targeted marketing message and save you time and money in reaching prospects.

5. What is your pricing? Pricing is an art and a science. You need to cover your costs and generate a reasonable profit. Doing research to see what your competitors are charging can help.

6. Are you watching your costs? Many entrepreneurs tend to underestimate how long it will take for their small business to turn a profit. Don’t burden your business with too many costs too quickly. To keep costs to a minimum, hire interns and outsource or barter for services.

7. What’s your plan for getting customers? One of my coaches says the secret to business success is spending 85% of your time doing things that will lead to sales and 15% of your time doing everything else. You’ll need a marketing plan. How do you plan on attracting prospects and converting them to paying customers? Design your advertising to generate sales. Your advertising should always include an offer and an easy way for prospects to respond.

8. Are you using social media? More and more businesses are moving to social media because their prospects are on social media. Only about 25% of small businesses are using social media to build their business. So, creating a presence on social media will give you an edge. This typically means building a fan page on Facebook. There are many resources you can use to build a fan page.

Here are some small business tips to attract more customers online:

1. Be sure to add local content targeted for your specific area.
2. Make sure prospects can find you online and offline.
3. Be very clear about what your business offers.
4. Participate on social media consistently.
5. Watch what your competitors are doing. See what is working and what is not working.

These small business tips require you to be consistent. It takes persistence to establish a social media presence.

If you act on the small business tips above, you will increase your chances of success, you will effectively leverage your time, and promote your business profitably.

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