Whatever you need to know about the pricing
Cost estimation is a traditional way of pricing. There’s another way of estimation which is a value-based estimation and you will also learn about it in this module later on. The value that your products, services, or end result will have in the mind of the customer, has special prices. If you find out the price of the values that you can produce for the customer, you can price your product based on that. For so many products and services, just estimating on cost and adding some margin is not really enough and you may lose some profits. This is also something that needs to be avoided under any circumstances. For example, if you have a coffee shop and the cost of production of one coffee is 50 cents, by adding 40% or 50% benefit on it could not be considered as a sturdy profit.
So, you should understand how much this coffee has value in the mind of the customer and also estimate your cost based on. On the other hand, there are a number of different factors also involved in value-based pricing. For example, where does your coffee shop located? Is it a luxury based service? How trained are your staff? and so many other factors that can increase the value of the coffee in your coffee shop. Coffee is still the coffee, but all different small detail issues would increase the value of a cup of coffee in customers’ mind and they may pay 5$ instead of 2$. The best example in this field would be branding.
Even though most of the brands offer better quality than normal products in the same industry, but their customers think they are more valuable and they are also ready to pay more money for it. if you use branding techniques and franchising it will increase the value of your service so you can ask more money for your offers. In this part, you will list at first the values that your offers can make for your customers, and then you will assess how much these value worth for the customer. Keep your mind unoccupied and ask your friends and relatives about it. There are no special rules to estimate the values. Be realistic and avoid estimating too high or too low.
