3 Essential Pricing Strategy Tasks to Conduct Every Year
Pricing isn't just a number—it's the true driver of your revenue, keeping your financial health steady and your growth trajectory upward.
But when was the last time you gave your company’s pricing strategy a check-up?
If it's been over a year, it's time to roll up the sleeves and listen up!
What to Do When Revisiting Your Pricing Strategy Formula
Here are three annual pricing tasks you must perform to ensure your company’s financial success.
1. Conduct a Comprehensive Cost Analysis
First things first: let's talk numbers.
Your pricing should stem from a crystal-clear understanding of your costs—both fixed and variable.
Costs will vary quite a bit based on your business model, overhead cost, and ongoing investment into your business.
You’ll want to lay out all of your costs including both fixed and variable costs.
These can sound scary but it’s actually super easy:
Fixed costs are like your business's rent—a cost that's there regardless of your sales volume. Software subscriptions, banking fees, and taxes are in this category too.
Variable costs—the more you sell; the more these add up. These are your direct costs of production or service delivery, like raw materials or employee hours.
Your pricing strategy formula needs to cover at least your variable costs + your target margin. For most businesses we’ve worked with, this ranges between 20-70%.
NOTE: We always recommend you work directly with a professional (like us) to understand what your margin should be based on your business model.
2. Review How Your Market Rates Are Positioned in the Competitive Landscape
Your prices don't exist in a vacuum. They swim in a sea of market rates, competing brands, and customer perceptions.
Just because you have low costs, doesn’t mean you should severely underprice.
On the flip side, if you have higher costs you may need to position yourself as a luxury alternative in the market, or be willing to take a lower margin in order to be competitive.
Here’s what to do: Look into pricing across 5-10 local competitors who are positioned similarly to your business and offer similar services to you.
This will give you a sense of the range offered in the market.
Remember to keep in mind that your brand positioning can play a part here too! If you’re trying to provide a more high-end, luxury experience you may want to charge a bit more, or vice versa if you’re looking to do more volume at a lower price point.
3. Leverage the Power of Repackaging Your Products / Services
Here's a nifty trick—bundle your services! Combining products or services into irresistible packages can motivate customers to purchase more per visit.
Not only does it simplify decision-making for them, but it also boosts your revenue!
Keep in mind that when you offer a package you’ll want to offer it at a slight discount versus if the customer bought the packaged items separately, to incentivize purchasing the package.
Need Help Revamping Your Boutique Pricing Strategy?
It’s a BIG deal when you change your pricing. So when you do it, you want to do it right.
If the thought of redoing your pricing gives you a sense of dread, give The Boutique COO a shout!
We have helped many business owners do a full cost analysis and pricing revamp, that has turned out to be the key to their growth.
