For any new business entrepreneurs pricing is perhaps one of the most mind scratching exercises when preparing business plan. It is always difficult to tag the price on the value that you provide your customers. I have not seen any absolute formula for calculating the real value price of your product or service considering the customer emotions.

Pricing any products or services is not a one-time excercise. Carefully analyzing the market dynamics, your costs, customer loyalty and emotions, purchasing level of consumers, market competition, your brand position in market, demands, your cash position and many other factors influence the price and you will have to revisit the price chart and revise many times. But you will have to consider if the price is appealing to the consumers or not. And also evaluate the profit margin for yourself.

It is always difficult to tag the price on the value that you provide your customers. I have not seen any absolute formula for calculating the real value price of your product or service considering the customer emotions.

You cannot survive if you charge less than the cost you spend to produce the product or deliver the service. By estimating the total cost of operation of your business, you find out the break-even point of your business. Based on that you can set the prices for your products and services. Consider all your costs, amount you want to save, salaries, promotion costs, transportation and shippings, packaging, rental, insurance, taxes, debts, and all other expenses. You can then compare your estimated prices to the prices your competitors charge. You must be competitive enough to break through the market. But for long run, your low cost strategy does not work. As you go along, consumer loyalty, emotions and paying capacity are a major factor in what you can charge. You must understand the consumer emotions, which changes quite often, depending on local, national and global market factors that usually are beyond your control. Also at the same time, consumer purchasing capacity changes as the general or local economic situation varies. Many entrepreneurs are not aware about the power of consumer emotions. If you can study the consumer emotions and the changes in purchasing capacity, you can better price your product and services and you can keep rolling and even excel.

Many entrepreneurs forget the consumer emotions over the time and also forget to review the cost when they are in profit. To generate additional profit, you must review your cost and all other influencing factors time and again.

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