Smarter finance: Set your pricing strategy

When was the last time you reviewed the prices for products or services in your business? Are you confident that you correctly identified all actual costs before setting the price? One of the best ways to achieve profit in your business is to review your pricing strategy.

Whatever your costs are, you must add a margin that makes your business financially viable before you determine the price. Completely flawed methods of pricing that will cause a business to fail include an owner having a 'hunch' as to what customers can afford, pegging your prices to competitors (who may be about to fail), and just adding an incremental increase periodically without checking actual costs.

Learning objectives:

• learn how to conduct a pricing review, including accurately identifying all costs
• maximise profit by determining which pricing strategy is best for your business, including identifying what viable margin needs to be added to costs
• gain an understanding of how customers perceive value and dispel the myth that customers are price sensitive.