Entrepreneurship Lessons: PRICE DETERMINATION!

Gilbert Kamusasa, 13/12/2020

The worst assumption an entrepreneur can ever make is to assume that all your potential clients are willing to pay for your product at one universal price. This assumption has prematurely killed many startups, a few of mine included.

How you price your product or service will determine the overall performance of your business because without income, your business is as good as dead. A product/service correctly priced will perform well and take your business to the next level.

Now the question I always get is how best can I determine the right price for my product/service? Here are a few pointers that have worked well in some of my experiences:

1) Don’t be greedy

Never charge an exorbitant price taking advantage of a client because they are ignorant or they have the money. Always charge a fair price. Don’t try to get rich with one business transaction. A fair price will lead to repeat sales and referrals.

2) Know your market

Before determining the price for your market, test the market. It can be through surveys or actual sales of a few samples. Take customer feedback seriously. Come up with different market segments and do a proper analysis to see which segments will give you the highest returns. Focus on a selected few segments and ignore the rest of the other segments that will not grow your business.

3) Create different price ranges to suit targeted markets.

For the selected few segments that you want to target, see if you can alter your product or service without affecting its functionality and end result. This will help you in your costing and will enable you to come up different categories that will match your marketing segments. Examples of such categories are; standard quality, high quality and premium quality. You are then able to price your product differently according to the quality and targeted market segment. You can even start with the most profitable segment and then expand into the other selected segments as your business grows.

Knowing different market segments and their profitability to your business is one of the most important aspects that determine the success of your business. I cant emphasize this enough.

4) Be consistent

Finally, be consistent. Never randomly change your price just because you feel like it. For your own information, customers talk to each other about you, they compare prices that you charge them. Stay consistent because consistency builds credibility and trust.

In a nutshell, the price that you charge to your client will either grow your business or kill it. There is no one universal price to the whole market for your product, study your market and implement price differentiation. Once you get that right, your business will grow.

Gilbert Kamusasa is the CEO and co-founder of Divcon Business Solutions (www.divconsolutions.com). Divcon is a technology-based consultancy company that focuses on providing a wide range of solutions to businesses and individuals.

Divcon: Phone: +263715592622 / +2637150071450 | email [email protected] | Website: www.divconsolutions.com | Office: 72 George Silundika Avenue Harare | Social Media: @divconsolutions – FB and @BusinessDivcon – Twitter