You can be on Entrepreneur’s cover!

The Price Is Right How to establish appropriate prices for your product or service

By Paul DeCeglie

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Business Start-Ups magazine, January 1998

As a start-up business, establishing appropriate prices is critical to your early success. If your prices are too high, sales will suffer and many potential customers will be alienated--perhaps permanently.

Pricing products or services too low--a temptation for many start-ups--not only impacts profits but also may preclude business from corporations and others seeking quality. Also, if your clientele is attracted by low introductory prices, what will become of that customer base once you adjust prices to market levels?

The solution? Many entrepreneurs study the market to determine what competitors charge for the same products and services. Then they set their prices somewhere in the middle range.

If yours is a specialty business or one that provides premium services--such as the upscale Best Friends Pet Resorts & Salons, you might want to take a tip from Dan Charleton, chief marketing officer for the Norwalk, Connecticut-based chain that began franchising last year.

"The first thing any pricing planner needs to do is gain a thorough understanding of who the customer is demographically," says Charleton. "If you don't know that, you can't understand who they are economically. For example, if you are starting a business, ask yourself these questions: Who are your likely competitors? What is their customer base?"

"Costs are secondary in establishing prices," adds Charleton, who has applied the same principles in establishing retail pricing for TCBY Treats, Acapulco Restaurants Inc., Denny's Inc. and Wendy's International Inc. during management stints with each chain. "Your primary consideration is the volume that can be [generated] from a satisfied customer at a given price. You must understand what the market will bear for your product or service. Do a thorough job of analyzing who the customers are, what their expectations are and how price fits into their perception of value. And recognize that price selection is relative and constantly changing."

Contact Source

Best Friends Pet Care Inc., 520 Main Ave., Norwalk, CT 06851, http://www.bestfriends.net

Paul DeCeglie is a former staff reporter for Journal of Commerce and American Banker. He can be reached at MrWritePDC@aol.com

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

This Insurance Agent Started a Side Hustle Inspired By Nostalgia for His Home State — Now It Earns Nearly $40,000 a Month

After moving to New York City, Danny Trejo started a business to stay in touch with his roots — literally.

Business News

Side Hustles Are Soaring as Entrepreneurs Start Businesses Working Part- or Full-Time Elsewhere, According to a New Report

The younger the entrepreneur, the more likely they were to start a business as a side hustle.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Business News

Scrabble Makes First Change to Its Board in Over 75 Years

The new roll out is only available in Europe as of now.

Business News

CPI Report: Inflation Rose More Than Expected in March, Driven By Housing and Energy Costs

The average U.S. household is paying $227 more per month for goods compared to one year ago.

Starting a Business

How to Start a Gift Basket Service

You've been complimented on your crafty and unique gifts for years. Turn your talent into a hot new business with a gift basket service.