What is Value? And how do you establish the Right Price?Nov 15, 2023
The questions “How do I know this is the right price for my product?”, or “How much should I charge for my product?”, are common questions from new members to Firecircle. The good news is that there are so many ways to determine “the Right Price”……
One of the most important things to remember is that a price is a SIGNAL. The consumers are constantly sending signals to the marketplace about the price they are willing to pay for certain goods and services that are being traded in the free market. An exception to these goods and services would be any that are subsidized by government or under the constraint of other policies or taxes which do not allow a ‘free-floating’ price driven by supply and demand. In tourism and hospitality – in countries that have true, free-market economies like Canada - we mostly have free market pricing for our products and services. And our customers are telling us what the ‘right price’ is EVERY TIME THEY MAKE A PURCHASE.
To explain this further, every purchase of any good or service at a certain price is a signal that THAT price was acceptable to the purchaser – that they saw enough VALUE in what they were purchasing to pay THAT price. They were both willing and able to pay the price they did. So the signal to you, the business owner, when your products and services are selling, is that, “my product is generating enough demand and delivering enough VALUE for my customers to pay THAT PRICE. They have accepted your prices.
If, on the other hand, you find that you are not selling much of your tourism products, two factors could be in play:
- Have you created a product or service that the market really wants? Did you do your research and determine that there was a NEED for your product or service? You need DEMAND from a decent size of customer base to generate sales
- Have you priced your product too HIGH? Did you do your market research and find comparable products and services to see what THEY are charging and for what bundle of goods and services? Your competitors can give you so much information about price: if they are successfully selling similar products and services to what you are going to be, or are, selling, then you can assume that their customers are WILLING and ABLE to pay that price. This gives you an important benchmark for your own pricing: is your product or service delivering MORE value than your competitors? LESS? Compare your value proposition to theirs and see what your range of pricing should be!
Use Firecircle’s simple worksheet to document your pricing ‘bandwidth’. Your pricing bandwidth is the RANGE of pricing that you can use to apply to your products and services with confidence that you are being competitive and that you are also responding to the ‘signals’ from the market.