Determining the pricing structure for your firm should be considered as a part of your marketing strategy. Your pricing strategy is not just an accounting activity, meant to balance the books but rather an opportunity to signal the quality of your work and support your firm’s branding. Price-quality signaling is an observable incident that affects consumer behavior. Whether or not your services are, in fact, higher quality does not matter necessarily, because the consumer believes the inputs to be of higher quality.
Rather than throwing a dart or guessing at the “going rate”, use the following simple equation to figure out an appropriate range for your pricing strategy.
- Cost & profit objectives: Start with your overhead costs and profit goals and work backwards from there.
- Demand: What is the market price? What value and benefits do customers perceive in the product and how willing are they to pay for it?
- Competition: How many competitors and similar products are in the market and in what price structure?
Once you have these three variables, you will know the minimum price you can charge to break even and … [..]