Entrepreneurial pricing and implementing it in your business

Being an entrepreneur can be very difficult in such a competitive market, and it becomes even harder when you have to decide on the best, most effective pricing strategies.  Although most entrepreneurs choose to go the simple route and make their prices lower than their main competitor’s, it may not be the best for every business.  The biggest problem in pricing at an early stage company is uncertainty - about customer traction, volume, orders, payments etc.  In fact, there are so many various pricing strategies to choose from that it can be hard to decide which one is the best for your business. This is especially true when you are just starting out on your business and don’t have the experience yet.

As an entrepreneur, we have to experiment with pricing to overcome our fears. In fact, the same product can be offered to different customers at a different price!

Here are three most effective pricing strategies made for new entrepreneurs.

Competitive Pricing
There’s no way to mention pricing strategies without talking about the most popular and misused one: competitive pricing.  Although many small business owners, freelancers and entrepreneurs use the competitive pricing method to help set their prices, many are doing it incorrectly.  In order to do it correctly, two conditions must be met.

First, you shouldn’t just take the prices of your main competitor. You should survey and take the average of the prices of all (or many of) your competitors. This will help give you the fair market value for your products or services.

Secondly, you need to determine whether your business cost structure is comparable to that of your competitors. More specifically, are your costs similar to or quite different from your competitors’? If they are similar, then you can set your prices a bit below theirs, and if your costs are lower, you can be much more competitive in your prices.

However, if your costs are higher than your competitors’ costs, then you can’t set your prices competitively without cutting into your profits.

Customer Perceived Value
This pricing strategy is based on using the perception of value that your potential customer has of your products or services. In order to calculate that value, you first have to determine what benefits, in monetary terms, your customer sees in your products or services and what costs your customers assumes.

The equation is:
Customer Perceived Value (CPV) = Total Perceived Benefits – Total Perceived Costs

Therefore, if your customer places a value of $50 worth of benefits on your products or services, and if the costs are $35, the CPV is $15. However, the lower the costs, the higher the CPV, and the more incentive a customer has to buy your products.

Therefore, you shouldn’t charge any less than what your costs are, but you also shouldn’t charge any more than the total perceived benefits. Therefore, your price range should be between $35 and $50.

Cost-Plus Pricing
The last pricing method is also quite common. Here, you are going to make your pricing determination based on your costs plus any satisfactory markup.  In order to use this pricing strategy, you have to calculate all the costs associated with producing one unit of your goods or provide one hour of your services.

These costs include variable costs (such as materials, direct labor, etc.) and fixed costs (rent, utilities, fixed salary, etc.). When you have your costs, you then add a markup to come to the final price.
So let’s say, for example, you calculate your fixed and variable costs per unit to be $20. With a standard markup of 30%, your price should be $26.67.

While this pricing strategy is straightforward and guarantees you have a comfortable profit margin, it does have one drawback. It doesn’t take into account your competitors’ prices, and therefore you could be over- or undercharging on your goods or services. 

These pricing strategies, in general, are good depending on what your products or services are and what industry your business is in. When you understand your costs, your product value proposition and your industry, you’ll be able to choose the best pricing strategy.

There are many different pricing strategies that one can choose from.  It is basically choosing the one that is right for your business.  I have included a few more that I have found and would like to share them with you. 

1. Introductory pricing strategy

This strategy means that you will set low prices in order to enter a new market for your company. This strategy usually is used by startup companies and companies that want to enter into a totally new market for them.

2. Skimming pricing strategy

With this strategy, you will set up the higher initial price. After some period of time with this strategy, you will start slowly on a gradual level to decrease the initial high price. Usually, it is used by businesses that introduce unique high-tech products on the market. After some period of time when competition will start to increase in such a market, these companies are in a position to use the cheaper level of prices.

3. Price lining strategy

With this strategy, you must group the products into different categories and then set up the same price for all items in each of the categories.

4. Bundling as a pricing strategy

With this strategy, you will group different products and services together and sell them for less than amount if each of them was purchased separately. With this strategy, you simply want to increase average sales volume from an average customer. It can be used periodically to increase your company’s sales volume.

5. Premium pricing strategy

This strategy means that you will set higher prices because of the uniqueness of your products or services. If your products or services are unique enough, you can set really high prices for them.


By choosing one of the pricing strategies it will help the business reach it's potential that is expected.  Without the proper strategy the business may not do as well as hoped.  With that effective pricing strategy, I’ll be able to set competitive and profitable prices that will help me to boost my new business.