Before launching into a discussion about the balance between price and quality, it would be good to take note of a quote from John Ruskin called The Common Law of Business Balance. It states:

“There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person’s lawful prey. It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money – that is all. When you pay too little, you lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk, and if you have enough to pay, then pay for something better.”

Finding the appropriate price point for your product or service can prove to be a little taxing. The pricing should benefit both the customers and your company. The product should not be priced too high, as it can reduce the consumer demand for your product. Select a perfect balance to obtain the desired result.

Consider the Consumer

Decide the pricing on the nature of the product. For instance, consumers will readily prefer a low priced gas station to save some money. Consumers will also be thrilled if McDonalds initiates a new low priced burger. However, customers become skeptical and doubtful if you offer a new vehicle for a meager amount of $1,000. Select the pricing by considering the involvement of the consumer in the buying-decision process. Include all investment factors in order to earn a decent profit.

Competition and Production Costs

Do not commit the mistake of pricing your products on the basis of your competitor’s pricing strategy. The competitor might be investing less on the manufacturing aspect, and this might be the reason for the low pricing strategy. Incorporate all the costs that go into the actual production while deciding the price of the product.

Consider Quality and the Current Market

The quality of the product and the demand plays a vital role in the pricing of a product. You will certainly not expect your customers to buy a poor quality product for a higher price. The consumers should feel that they are paying the right price and obtaining the best service or quality in return. The same logic applies to consumer demand and the current market.

If the demand for the product is less, there is no point in increasing the price of the product. Gauge the consumer demand and select the price accordingly. Introduce the product for a lower price, and gradually increase the price on the basis of the consumer demand. If you make good profit, increase the price. If you suffer a loss, reduce the price to the original. With a gradual increase in consumer demand, you can also offer services such as discounts to your customers. This will propel the demand for your product.

Profit is the ultimate goal of any business. Your small or medium business cannot succeed if you do not have a handsome profit margin. Do not price your products too low as well, as it will prevent you from covering the advertising, distribution, and labor charges, if any.

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This entry was posted by Staff Writer on Saturday, June 28, 2014 at 5:25:45 PM and is filed under Small-Medium Business.

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