First Business

April 03, 2012

Management & Leadership: Four rules for pricing products

Before pricing your products and services, you need to understand how customers perceive value. I continually find business owners price their products or services based on what they cost, versus what their customers are willing to pay.

Even worse, I find businesses that base prices simply on what their competitors are able to get away with. A bicycle shop will mark up the price of its bikes 20 percentage points because that’s what the shop on the other side town does. Same goes for the 30 points on bike parts and the 50 points on bicycling clothes.

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