Pricing strategy for small B2C businesses

When I founded Amperna in 2018, pricing of retail products was not something that I had tackled previously. In order to ensure my business succeeded I needed to get it right. Having spent a long period of time in the start-up phase, which involved working with a formulations chemist to realise our brand vision, I had the basis for my products and could start to gather costs required in order to produce them. Once had the rough costs required to make my products I then did research into competitors products in similar markets to my own. From here I set about creating prices that I knew would not only help my business grow but were also accessible for my target market.

Here are my tips to help you with pricing strategy:

Know your cost price

Without knowing how much your goods cost to produce, you can’t effectively set a retail price for them. Your products may be assembled from a large number of different components (ingredients, bottles, labels etc) so you will need to either create a spreadsheet for them or use specialised software to help you. Once you have collated all this information, you can then determine how much each unit costs to produce and have your base cost per unit.

Determine your cost of goods sold

Now that you’ve worked out how much each unit costs to produce, you’ll need to take the costs associated with getting this product into your customers hands into account. If you’re an online retail store this will include things like shipping costs, packaging and postage labels. If you haven’t gotten quotes for these goods and services, then you will need to do this before you can effectively price your products.

List your operating expenses

Running your business is going to come with a number of different expenses, which quite importantly includes the salary you’re going to receive. You’ll want to be able to pay yourself a wage and if you haven’t allowed enough in your profit margin for this to occur then you will struggle to grow your business.
Other operating expenses you’ll incur will be things like marketing costs, advertising, consultancy fees, rent, power and so on. In the early stages of your business some of these costs may be lower than others (as a small business you might be working from your home for example), but as it grows you will need to ensure that you’ve allowed for these costs.

Put it all together

You should now have a decent idea as to how much your products cost to produce, cost to sell, and how much money you’re going to require to run your business. Using this information, you will need to calculate a profit margin that allows for all this. As your business grows, due to the economy of scale, you’ll be paying less per unit which will also help grow your profit margin.

Always keep your target market in mind as your goods need to be priced at a level your customers will pay. If your retail price isn’t realistic then you will need to look at ways to lower you costs.

Pricing strategy is something that you should constantly be reviewing as leaving prices the same for a long period of time will ultimately hurt your business. As your suppliers raise their costs and your goods cost more to provide to your customers, you will need to adjust your pricing to be able to absorb this and help your small business continue to grow.