A Closer Look at Price
Let's look a bit closer at one component of the marketing strategy—how an entrepreneur determines price. A good business plan will show that the entrepreneur has thought strategically about how to price the offering. The price you charge for your product or service should reflect and support your overall business strategy. When you establish a price for your product or service, you should keep in mind:
- Value. Customers need to feel like they're getting the benefits they want. In order to make sure your customers feel like they are getting a good value for the price, you must understand what it is that drives customer buyer decisions about your product or service. Know what's important to your customer.
- Rationale. Customers also need to understand why prices differ between competitors. Good entrepreneurs help customers recognize why their products are more or less expensive than other offerings in the market.
- Positioning. Some companies charge higher prices when competition is minimal. When competition is fierce, companies may strategically price their products slightly lower than their competitors, or they may substantially under-price the market to get rid of competition altogether.
Let's take a look at the portion of Steep Brew's Marketing and Sales Plan that explains their pricing rationale.