When you run a small business, pricing should be one of your main areas of focus. After all, the price tag that you attach to the products or services that you provide will largely determine the amount of potential profit that you can make. Now, there are all sorts of aspects of pricing that you need to take into account and consider seriously. For the moment, let’s look at two areas you should think about for now: fluctuations in the market and competitive pricing strategies.
Account for Fluctuations in the Market
Sometimes you will be able to alter the prices of your products according to fluctuations in other areas of the market. Say you provide mixed snack boxes of fruit and nuts. This could prove to be a hugely successful venture, as increasing numbers of people are deciding to snack healthily, or have turned to a vegan and vegetarian lifestyle and are looking for alternative snacks. Your snackboxes are likely to contain a variety of ingredients and you are likely to buy these in bulk from wholesalers before mixing them and repackaging them yourself. You should keep a strict eye on the costs of each individual item you are incorporating into your box, as prices can fluctuate. Take cashew nut supply as an example. At the moment, the price of cashew nuts are rising significantly due to complications in Vietnam, the world’s largest cashew nut producer and processor. When raw materials become relatively scarce, their price rises. By acknowledging this, you can deal with the issue in one of two ways. You can either increase the price of your snackboxes to accommodate the increasing price of the cashew nuts that they contain, or you can remove cashews from your snackboxes and relaunch your product with a different set of ingredients. If you don’t account for these fluctuations in the marketplace, you will fail to make as much profit and may even make losses over time.
Price Competitively
Competitive pricing is a point of contention amongst many businesses. When one company undercuts the prices of another, they can easily steal the other’s customers from beneath their feet. But it’s important to bear in mind that this also significantly reduces the perceived value of your goods over time, as if companies keep undercutting one another, consumers come to value the product less. You also all take home less profit, as your profit margins significantly reduce. So, you need to be careful when it comes to your competitive pricing strategy. Sometimes you can sway customers to use your company without devaluing your product. Consider offering free postage, discounts on multiple purchases, or other offers instead.
You should always keep these two areas in the back of your mind while providing products and services to the consumer market. As long as you remain up to date with the different markets you are engaging with, everything should go swimmingly!
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