What should a business do to maintain fair pricing?
Balancing the cost of running your business and trying to keep your prices fair can sometimes be difficult. When considering fair pricing, its best to evaluate local costs rather than trying to compare with national prices for the same goods and services due to different cost of living situations in areas around the country. Here are a few tips to consider when trying to maintain ethical business practices regarding your pricing:
- Join a local chamber of commerce. Chambers of commerce are local business associations that help each other market their products and determine healthy pricing within a community.
- Evaluate what your competition’s pricing is and use that as a tool when considering your own pricing. By looking at similar businesses, you can get a good starting point for determining your own costs.
- Make use online tools to track local prices of certain goods and services. Some examples are Pricezag.com or Prisync.com. These services automatically track pricing changes and sales that your competitors offer and can keep you in the loop about what they are offering.
How do you come up with prices?
When determining your prices its important to think of all the factors that are behind a well balanced cost of an item. You need to calculate direct costs, including duty, freight loads or shipping issues that may occur. Calculating your cost of goods sold and the cost of sales which represents costs of producing a certain product or providing items or services that are ready to sell. Businesses don’t always factor overhead costs that impact profits made. Determining your ‘markup’ is important because it ensures that companies receive a high enough growth and profit margin which can help with fixed costs, while also aiming to earn a larger profit.
To make sure businesses are being transparent with their pricing, they must communicate prices very clearly, be consistent in pricing, research business competitors, use a value-based pricing system to follow, and be as transparent as possible with competing businesses about pricing changes or any issues that occur.
