The Perfect Pricing: how to determine the perfect price for you program
When it comes to setting a price for your program you have to be very cautious and considerate to various things. Pricing is a touchy subject, but it is something that can make or break your business. You need to price in a way that will be competitive with your competitors but also cover your cost. There are so many things to consider when pricing your program, competition, target market, cost, perception, supply, and demand. The perfect pricing is challenging, but important so you must take your time to get it right.
To come up with the perfect price you need to find the answers to a few things first.
Target Audience: The first step is to determine your target audience. You must do this to price effectively because you need to think about what your customers will be able to afford and what they would be willing to pay for your program. Get to know your target market well so you are able to understand their thought process and spending methods. Thinking about why people should pay for your program, what the benefits are for participating and why it is worth their time and money.
Cost Consideration: Take all your cost into consideration before setting the price of your classes, you need to ensure you are covering your cost or it defeats your main purpose for being in business.
Do your research and take a look at what your competition is charging for programs similar to yours. If people can find the same service somewhere else for a significantly lower price, you don’t stand a chance.
Once you have done your research and found the answers to those important questions you can begin to set your price. When finding the perfect price for your program there are some different pricing strategies to consider. There are three main types of pricing, each one can be effective, the best option will vary with the circumstance. There is Value-based Pricing, Cost-based pricing, and Competitive-based pricing.
Value-based pricing is exactly how it sounds, based on your target audience you need to determine the maximum that someone is willing to pay based on the perception of the service you are offering. For example, if you are in a higher-end area with what is perceived as a luxury program, you can charge more than if you were in a low-income area. You base the price of your program on the quality of the program you are offering.
Cost-based pricing is when you consider all your costs for the month and then figure out how much profit you would like to make from each sale, the markups are typically between 10 and 30%. Also consider how much revenue is needed to break even based on your fixed and overhead costs such as rent, labor, supplies, etc. Set a reasonable price that will cover all your costs and still allow you to make money.
Competitive-based pricing is researching what other programs your clients can potentially enroll in, and benchmarking your price based on that. Consider alternative programs, and research what those programs are priced at. This technique helps ensure that you are not overpricing your program.
Taking each of these methods into consideration to come up with the most appropriate price possible is the best option. When combining portions of all three methods together, you are covering all your bases and getting the best of both worlds.
Factors and Considerations When Pricing:
There are many more things to take into consideration when pricing. Perception and reputation are major factors when it comes to pricing. People change their perception of the value of a product based on the price, the higher the price the higher the quality appears.
Perception: Consumers hold a very strong correlation between price and quality for just about everything in life, that’s why it is always best to start high and adjust from there. It is easier to lower a price rather than raise it. When customers get used to a specific price they will not be happy if there is a significant increase in the price, they will think it is overvalued. In saying this, you should always remember your program value and not compromise on that. Keep in mind that people don’t always buy things when they are at their cheapest, it’s best to offer a variety of options so each customer can decide on the price and program that works best for them.
Reputation: There are certain things when it comes to pricing that can harm your reputation, so you need to be careful and not make those mistakes. Doing something like adjusting your prices constantly will hurt your reputation and reflect poorly on your image. This is why you need to take your time in the beginning, invest time into research and be considerate throughout the entire process.
Affordability: For education and programming, it is important to make it affordable enough for the majority of parents and your community to be able to afford it. The price for your program and activities should be cost-effective for the parents, so it is not that big of a sacrifice to enroll their children.
Adjustments: Pricing an individual workshop is different from pricing classes or a semester of a recurring program. Typically workshops and individual classes are priced higher than the price of a single class in a semester payment plan.
Bulk Discounting: You should give your clients a lower price for enrolling in a large number of classes or programs, this encourages participating in more events. Discounts for other encouraging things like early enrollments and referrals are also a great idea!
Consider Supply & Demand:
Another consideration when pricing that is frequently missed is taking supply and demand into account. If there are lots of similar products offering the same programs and activities, then your price should be a little bit lower than if you were offering a scarce program. With less competition, the more you can charge.
Also consider how the supply and demand change over time, if your programs are increasing in popularity, instead of limiting individuals and placing them on a waitlist, consider just raising the prices of your offerings slightly.
To be safe with your pricing you have to keep an eye on the markets and know what is going on in your industry. Do this to set yourself up for success.
The perfect pricing requires a lot of time, consideration, and research. When setting program prices you need to think of a lot more than about how much money you want to be making, you have to determine a price that is attainable and reasonable for your target market while still considering the bottom line. Don’t rush the process and be very careful throughout the entire process. Don’t be stuck on a certain price and be open to adjusting if needed. The main takeaway should be finding a price that works for the largest amount of your target market.