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A common mistake we see among small business owners is a lack of strategy behind their pricing. This almost always results in negative long-term outcomes for their business.

There are so many different ways to decide how to price your product. Cost-Plus Pricing, Market Oriented Pricing, Dynamic Pricing, Loss-Led Pricing and Discount Pricing are some of the strategies that business people have been using over the years.

Most Common Pricing Strategies in Ghana

Two of the most used strategies are the Cost-Plus Pricing and Market Oriented Pricing. With the Cost-Plus Pricing strategy, you decide on the markup you want to make (this is the profit you want to make on an item) then add it to the amount it cost you to get that item. The only way you would not be able to achieve that markup is if you estimate your cost. Be sure that the full cost has been calculated before adding your markup.

When using Market Oriented Pricing, you match your pricing to that of your competitors. Examine and compare things like the quality of the product or service.  Depending on how you want your product to be perceived, you can decide to price higher, lower or the same as your competitors.

Keep in mind that low pricing does not guarantee more sales. 

An Important Factor to Consider: Elasticity

Price elasticity of demands refers to how the demand for your product changes when there is a change in the price of the product. For inelastic products, like water, a price change doesn’t affect the demand. The opposite is true for elastic products. Knowing where your product falls helps you to know whether or not you should make use of strategies such as discounts and promotions and the extent to which you can use these.  

How you price your products plays a key role in how much profit you can make and how others see your products. Make sure that as you price, you are able to cover your overall costs and that the prices reflect the quality you believe that you deliver.