How can I make sure my pricing is right for the market I’m in?
LIZ MCKEON, BEAUTY BUSINESS EXPERT:
Pricing your products and services can be a challenge and is something that many businesses struggle with. Set the price too high and customers will stop buying from you. Ask too little and your profit margin slides or clients assume your services are of poor quality.
An ‘optimum price’ factors in all your costs and maximises your margins while remaining an attractive option to your clients. You need to consider manufacturing costs, market place, competition, market condition, brand and quality of product. A well-chosen price list should achieve the financial goals of the business (profitability), fit the realities of the market (will the clients buy at that price?) and support the salon brand’s market positioning.
To set your prices there are few things to consider. I have listed these below.
KNOW THE MARKET
Find out how much clients will pay, as well as how much your competitors are charging. Consider matching or beating their pricing. However, never just price match, as you need to be sure all your running costs and overheads, both indirect and direct, are covered. Invest time and energy into adequate market research in order to know and understand your market.
KNOW YOUR COSTS
Include all costs, every single expenditure it takes to open your doors and keep the business running. Add all these costs together and divide by the volume of services required to produce a daily and weekly breakeven figure. If necessary, ask your accountant to assist you as it is critical to know your numbers.
CONSIDER COST PLUS PRICING
Add a margin or mark-up to your breakeven point. This is usually expressed as a percentage of break-even. If the price looks too high, trim your costs and reduce your pricing accordingly. Include the value of your time in pricing: your time is
valuable, and you need to include it when calculating your prices.
CONSIDER YOUR SALON POSITIONING
Service positioning is the unique identity of a service in a competitive market. A valuable position serves client needs and stands out from the crowd, in a way that has meaning to clients, enabling you to charge more. Clients are not always looking for the lowest prices, particularly if they know they are purchasing exclusivity, or your salon is located in a high-end convenient location. Think about all the factors that are involved in pricing. For example, how will charging VAT impact on your pricing? Can you keep margins modest on some services in order to achieve higher margins on other services?
Prices seldom stay fixed for long. Running costs, clients and competitors can change, so you will have to change your pricing to keep up with the market trends.
For further information on the services Liz offers go to... www.lizmckeon.com