Lesson Three
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Lesson Three
This can always be the hardest part of setting up your fist side hustle, you don’t want it to be too cheap that you can’t make a profit. But you also don’t want to be to expensive and no one buys it! So where do we start?
It is good to understand the different ways that a business can determine the pricing for their products/services and then pick one that suits you best!
Remember, the aim is to always ensure you cover your costs and then make enough profit that it is worth your time and effort!
Now that you know exactly what your cost is per item made, you can figure out the profit you will make based on your pricing. If you did the costing breakdown correctly, then your profit will be the total price you sell it for, minus the costs per item.
By using the percentage pricing, we use a select percentage to add to the cost of the item to determine the price. So 100% percent markup (percentage added to the cost) will give us the same profit as the cost. At 200% markup, we will get double the cost back in profit.
Add the percentage to your cost and see what the price looks like on all of your items/services offered. It if feels to high then change it, but keep the same percentage across all of your products.
This process of pricing is done by looking online at the different prices your same product/service is being offered for by other businesses. You can then get an average of what the price is for what you are making.
You can then choose a price for your product/service that sits in the middle of these other business prices to have a safe price.
It is not a good idea to always try be the cheapest price in the market. It gives the impression of a poor quality product, and it is very hard to then increase your prices over time.
By the end of this process, you should now have an idea on what pricing structure you will use!
Understanding your customers and the ability to meet them at every entry point…
Why do we often get stubborn about our pricing point for what we offer? Generally, the first aspect of your business that a customer looks at is the price point. They may love your product/service, but will turn it down if it is not within their budget.
So why not create a pricing strategy that allows every individual to engage and purchase from your business regardless of their budget !
This is where the entry point comes into play. The process of creating entry points for your business is to have a variety in pricing options and deliverables based on what the customer can afford. You start off with the cheapest most basic version of your product/service, and then you scale up the price with included benefits/services, additional quality, and increased value for the customer.
Ideally the cheapest version is to be offered to the mass public, and then you can upsell the more expensive items to the customers that come back and see the true value you offer.
Our Example:
Image you own a bakery or catering service. You don’t want to have a single price point for one type of wedding cake that means only a few customers can actually afford it.
The concept of entry points means you will have a variety of baked good and services that allow for smaller budgets. By offering single pastries or a more simple cake version, you can bring in the customers at their budget.
Then once you have proven your quality to a customer you can start to sell them the higher priced items and value added services.
But don’t turn away customers if you can offer them a smaller, simpler version of your product/service!
What is the method to find competitor pricing?
