How To Set Prices For Your Business

How much did you pay for your cup of coffee this morning? 

Was it the 50 cents (or less) per cup you invested for some beans and a filter at home? Maybe it was 99 cents you shelled out at the fast food drive-thru. Or $2 at the deli? Or maybe you paid $5 for a pour-over coffee in a porcelain cup at the restaurant downtown?

That’s a 1,000 percent difference in pricing in the market. Yet, some rarely bat an eye when it comes to the price we’re asked to pay for coffee. And it’s not just because coffee is a delicious beverage that proves that there is a benevolent force at work in the universe; it’s because so much more goes into the price of coffee than, well, coffee.

When we buy coffee, we’re buying an intravenous-caffeine-drip-please, a pick-me-up, or a it’s-just-me moment. We buy the experience of a beautiful, bustling cafe or a catch-up with a friend. We buy the expertise of the barista or the cruel familiarity of the pot that’s been on the heat all day.

Coffee is so much more than just the cup in our hands, and the price we expect to pay for it varies depending on what else it is that we’re buying.

Your product or service isn’t any different. The market is vast and your pricing falls somewhere in that market. Some businesses choose to deliver a luxury experience, the best in materials, and the concierge service. Others choose convenience, accessibility and inexpensive materials. Those choices dictate price.

And they also dictate what customers are comfortable paying. 

Selling gas station coffee in a corner cafe with flowers on every table doesn’t make a whole lot of sense. It doesn’t matter that it’s 99 cents, you’d feel something was off. And selling pour-over coffee through a drive-thru window, while convenient, loses some of its appeal. It isn’t the five-dollar experience you were looking for.

Pricing is more than a numbers game. It’s more than the materials-plus-labor-plus-profit equation. Pricing is part of a whole package of better communication about the value your business is creating. And that whole package has a name: positioning.

Quite often, I see business owners pricing by default. They don’t make the choices that would allow them to position their products or services in a different part of the market and, in turn, charge more (or less) for their work. Positioning is about making conscious, consistent choices about how you’ll represent your business, its products and the experience your customers have.

Don't believe that these factors are out of your control. If there is any part of your business that you believe is negatively impacting your ability to set the price you want, take control and change it. Tell a different story, create a difference experience. Adjust your brand or positioning, change marketplaces, rework your network, invest in design.

Seek to create an experience that really means something to your customers and results in a sustainable, profitable price for your product.

And then have a cup of coffee. 

Tara Gentile is a member of the DailyWorth Connect program. Read more about the program here.

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