Timely and Competitive pricing, are among the secrets to business success. Pricing your services correctly boosts sales, maximizes profits, and sets a solid foundation for business growth.
Pricing your services incorrectly, however, creates challenging business problems—the kind that dooms your business to fail.
Obviously, you need to get the pricing right.
But getting the pricing right is easier said than done. Pricing is both an art and science—one that involves many factors. That makes pricing a challenge for many retailers.
The key is finding a pricing strategy that’s right for you. Fortunately, you have a lot of flexibility when deciding your pricing.
Few things to Think About before Setting a Price Strategy
Is your product valuable for your clients?
Remember you can always lower the price, but it’s much harder to raise it! Focus on creating high quality experiences for your customers. This will justify your price!
Think at Long-Term picture
How many sales do you need to make your Cleaner sustainable? Will you be able to offer special discounts or promotional pricing with the prices you are planning to set?
Understand what the Market Dictates
Charge enough to have a healthy margin, but also understand your customer and their market. For example, if the usual market margin is 40% you shouldn’t try to get 60%.
Know what you do best
Don’t start comparing yourself to other Cleaner businesses nearby. If you know you are specialized in something, you are great doing it. Don’t be afraid to price generously your top service!
What does your customers have to say?
When times passes by, you’ll learn to listen to your clients more and to look less to your competitors. You need to focus at offering high quality services to them. Care about their feedback! Then, as time goes on, you will be able to raise your prices.
Pitfalls to Avoid When Setting Prices
The flexibility you have in setting prices, however, doesn’t eliminate the risk involved in doing so. You face two key risks when determining your pricing: underpricing and overpricing.
Some companies set prices low hoping to drive sales. Underpricing your services can backfire on you big time.
Consumers often consider these services as cheap or undervalued.
Which can damage your brand’s reputation, remember Branding is more than a Name and a Logo.
Instead, you want to set your prices, so consumers feel they’re getting their “money’s worth.” Plus, you need to set your prices so that you cover all the costs involved in providing the service.
Other businesses overprice their services to maximize profits. This approach can be just as bad as underpricing. Remember, consumers are comparing your prices with your competitors’ pricing all the time.
If they feel they’re getting more for their money from a competitor at a lower price or the same price.
They will buy your competitors’ services, not yours.
Also, you want consumers to feel that your pricing is fair. So take time to survey consumers about your pricing to see just how your current pricing stacks up.
Six Commonly Used Pricing Strategies
In order to avoid these two pitfalls described above is to study the common price strategies the retail industry uses.
You have two basic approaches:
- Cost-plus pricing
- Value-based, where you set a price based on how customers value your services
We describe seven common pricing strategies below:
Popular with both retailers and eCommerce peoples, this strategy doubles a service’s wholesale costs. The strategy works well, but you need to make sure you cover your operating costs. Some companies use the initial price as a base, then apply markups/discounts.
Manufacturer’s suggested retail price is another pricing strategy popular with both retailers and eCommerce people. The manufacturer sets the price, and that’s how you price your product or service. This approach is often based on Keystone pricing.
Research shows that people feel some pain when they spend money. This pricing strategy helps alleviate that pain. Pricing something $3.95 instead of $4.00 is an example. Whatever pricing approach you select, apply psychological pricing.
Businesses using this approach often sell services below competitors’ prices. For smaller retailers, however, this pricing strategy leaves razor-thin profit margins, so it’s risky. Special markdowns, seasonal specials, and coupons all help lower prices for consumers.
This pricing strategy draws buyers into the storefront so they can buy more profitable products. Retailers set the price for a popular or much-needed product at cost or even below cost. Loss-leader pricing is another dicey pricing strategy that’s risky. Your profits on other items must cover your loss-leader costs.
This strategy is the simplest of the six strategies. You apply a markup percentage, say 20%, to the cost of producing the service. Make sure you add all your expenses to the costs before applying the markup, including indirect ones.
Price skimming is a product pricing strategy by which you start charging the highest price and then lower it over time. As the demand of the first customers is satisfied and competition enters the market. Then, you lower the price to attract a more price-sensitive segment of the population.
The skimming strategy gets its name from “skimming” successive layers of cream, or customer segments, as prices are lowered over time.
Many dry-cleaners use a mix of these pricing strategies to:
- Generate traffic at their storefronts
- Encourage additional sales
- Generate profits with other business strategies!
Optimum Pricing Maximizes Profits
Ideally, you want to set the “optimum price” for your services. That’s where you set a price that factors in all your costs and maximizes profits, yet still is attractive to consumers.
Below is a six-step process to find the optimum pricing for your dry-cleaning services:
This six-step process helps you set the optimal price point for your dry-cleaning services. Also, talk to customers to make sure your price or prices remain optimal.
Optimal pricing maximizes profits for your business and provides a solid foundation for growing your business.
Of course, pricing your product or service can be tricky. But paying attention to these important factors can make the difference between a profit and a loss.
In summary, understanding your brand better, working with your customers to understand their needs and how to improve their business… Will make you wiser!
This knowledge will deliver competitive advantage, higher profitability, and a stronger relationship between the manufacturer and their customers.
If you need some help with your pricing method, we bring you a Dry Cleaner Prince Planner.
This Planner will help you to know how much you should price your services, being sure it’s not a too high price nor too low! Knowing whether you have margin for some marketing strategies or promotional pricing in special days! For example: 15% off Army Uniforms for Independence Day!