Ask people to pay too much for your services or products and they will stop buying from you.
Ask too little and your profit margin slides or clients assume your services are poor quality.
An ‘optimum price’ factors in all your costs and maximizes your margins while remaining an attractive option to your clients.
Definition of Pricing:
Pricing is the process of determining what a company will receive in exchange for it’s products and services. Pricing factors are 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:
- 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. This will give you confidence in your pricing strategy.
- Know your costs.
Include all costs, every single expenditure it takes to open your doors and keep the show on the road. Add all these costs together and divide by volume of services required to produce a daily and weekly break-even figure. If necessary, ask your accountant to assist you and 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 per centage 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. Lots of clients do not mind paying higher prices , particularly if they know they are purchasing exclusivity or your salon is located in a high end or 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?
- Remain flexible.
Prices seldom stay fixed for long. Your running costs, clients and competitors can change, so you will have to change your pricing to keep up with market trends. Always keep focused on what’s happening in the market place, talk to your clients regularly to ensure your prices remain optimal.
And finally, set your pricing based on your own situation.