Understanding your target market is the first consideration when deciding on a pricing strategy. Who is your target market? What is their demand for your product? How much do your prospects have to spend? How much are they prepared to pay for your product? To determine this, one may consider how much prospects are currently paying for a competitor’s product. This method should, however, be used with circumspection as simply matching your price may be dangerous.
Another important aspect of pricing is understanding all of the input costs of your business. Simply matching your price to that of your competitors is dangerous because it often does not take into account what it costs to manufacture your product. Your pricing must cover all costs related to the product and also factor in a profit margin. At this point, one should also consider a break-even point and the fact that the cost of a product must include direct costs and overheads.
Competitive pricing: the process of selecting strategic price points to best take advantage of a product or service-based market relative to competition.
Pricing strategies are important and businesses can use a variety of these strategies when deciding on a price for a product or service to maximise profits. Though these strategies may seem daunting at first, basic market research and a competitor analysis can provide invaluable data for entrepreneurs to make informed decisions. In addition to our banking products, Bank Windhoek also offers mentorship services to qualifying small and medium enterprise (SME) customers to help them grow and make a success of their businesses. Contact your nearest Bank Windhoek branch for more information on our offering to SMEs.