As a Nigerian business owner, you should know how to set prices for my products or services. It’s not enough to cover your costs; you must find the sweet spot to attract people, stay competitive, and make money. The Nigerian market is lively and varied, with its challenges and opportunities. Because of this, knowing how to price your goods or services is very important for success.
Following this piece’s steps, you can correctly set prices for your goods or services. You must know Several things: your prices, market, and value proposition. We’ll also discuss different ways to set prices and how outside factors, such as the economy and government rules, can affect your choices. By the end of this help, you’ll have a good idea of setting prices in Nigeria so your business can grow as much as possible.
Here are 5 ways to set prices for your product or services in Nigeria.
- Know how much things cost
- Know your customer
- Figure out what your value proposition is
- Decide on a pricing plan
- Think about outside factors
- Check your price and make changes
- Tell people what your prices are
1. Know how much things cost
A. Costs directly: Before you can set fair prices for your goods or services, you need to know your direct costs. Direct costs are directly related to making your things or providing your services. These include the prices of labour, materials, and making the product.
If you own a clothing store, the fabric, thread, buttons, and pay for the people who sew the clothes are examples of direct costs. Getting these costs right is essential because they form the basis of your pricing plan. To avoid losing money, you should ensure that every item you sell covers these direct costs.
Take the time to list everything that goes into making or offering your service. Add up these prices to clearly show your total direct costs. This step is the basis for setting prices that will make your business money.
B. Costs that aren’t direct: The next thing you need to do when setting prices for your goods or services is to think about your extra costs. Overhead costs, also called indirect costs, are not directly related to production but are needed to run a business. Some of these are rent, utilities, office supplies, and wages for administrative staff.
In the case of a bakery, your indirect costs include the rent for your store, your power bills, and the wages of your sales staff. Even though these costs don’t change based on how many goods you make, you still need to include them in your prices to make a profit overall.
Give each product or service you sell a certain amount of these secondary costs. To do this, divide the total secondary costs by the number of goods or services sold during a specific time frame. By including both direct and secondary costs, you can be sure that your prices will not only cover production costs but also help your business stay open.
When you set the prices for your goods or services, you need to know and correctly calculate both your direct and indirect costs. This all-around method ensures that all expenses are covered, which is good for your business’s financial health and growth.
2. Know your customers
A. Studying the market: You need to know a lot about your market to set prices for your goods or services that work. In this process, market study is critical. You can learn a lot about your customers, like what they like and how much they are willing to pay. Market research lets you make choices that align with your target audience’s wants.
Use surveys and questionnaires to find out about possible customers’ buying habits, preferences, and how sensitive they are to price. You can also set up focus groups to learn how people feel about your services or goods. Use online study tools and social media to learn more about Nigerian market trends and how people act. This knowledge will help you determine the demand for your goods or services and what prices will bring in and keep customers.
B. Analysis of competitors: Another critical step before setting prices for your goods or services is to complete an analysis of your competitors. By analysing what your rivals are doing, you can set helpful goals and find ways to set yourself apart. By examining how they put their prices, you can better position your business in the market.
First, make a list of your direct competitors in your area. These are businesses that offer similar goods or services. Look at how they set their prices, advertise, and position themselves in the market. Write down how much they charge for their goods, if they offer discounts or deals, and how much value they give their customers.
For example, if you own a restaurant, you could go to other restaurants in the area to compare costs, portions, and how happy customers are. This study will help you determine who your competitors are and where you can fill the gaps with better value or unique features.
By mixing what you learn from market research with what you learn from your competitors, you can set competitive prices for your goods or services and still make money. This two-pronged method ensures that your pricing strategy is based on a solid knowledge of your customers’ needs and how the market works.
3. Figure out what your value proposition is.
A. Pros that make your business stand out: You need to determine your value offer by listing your unique selling points (USPs) to set prices for your goods or services that make sense. Your unique selling points (USPs) are the things that make your products or services different from those of your competitors. You can justify your prices and get customers who value the benefits you list by knowing and talking about what makes your goods or services unique.
Think about what you have to give that others don’t. This could be better quality, customer service, new features, or a cultural touch that makes sense to Nigerian customers. Say you run a skincare business. Your USP could be that your goods are made with organic, locally sourced ingredients perfect for Nigerian skin types.
Drawing attention to these unique qualities in your advertising and marketing helps customers understand the extra value they receive, which makes them more willing to pay a price that matches this value. Finding your unique selling points (USPs) is one of the most important things you can do to ensure your prices reflect the benefits and differences your goods or services provide.
B. How the customer sees it: Another essential thing to consider when developing your value offering is how your customers see value. What customers think affects how much they are ready to pay, and what they believe can be very different depending on their needs, preferences, and experiences. When setting prices for your goods or services, you should ensure they align with what your customers think they are worth.
You can find out what your customers like best about your goods or services by interacting with them directly on social media surveys and feedback forms. Listen to what they say repeatedly, like how good the product is, how easy it is to use, how good the customer service is, or how well-known the name is. How much your customers are willing to pay for different parts of your products will help you determine what your customers value most.
For example, if you run a shop that sells tech gadgets, your customers value warranty and customer service after the sale. Since you know this, you can highlight these benefits in your value offering and set fair prices for the full range of services and help you offer.
Combining your unique selling points with a deep knowledge of customers’ perspectives can help you create a strong value proposition that supports your pricing. This approach ensures that your prices for your goods or services are fair for your target market and help you reach your business goals.
4. Decide on a pricing plan
A. Priced at cost plus: Cost-plus pricing is one of the easiest ways to decide how much to charge for your goods or services. To make a profit this way, you add a markup to your total costs. First, figure out how much it costs to make the goods or provide the service, directly and indirectly. Then, choose a markup number that gives you the profit margin you want.
For instance, if it costs you ₦5,000 to make a homemade bag and you want to make a 20% profit, you would add ₦1,000 to that amount to make the price ₦6,000. This method is simple and ensures that costs are paid, but it doesn’t always consider how much the customer is willing to pay or how much other companies charge.
B. Pricing based on value: Value-based pricing lets you charge different amounts for the same goods or services based on how much your customers think they are worth. This approach concerns how much your customers will pay for your product or service’s unique features and benefits.
To use value-based price, you need to find out what customers think the product is worth and how much they are willing to pay. For example, people who like luxury and being unique might be ready to pay more for a high-end skincare line made with rare ingredients. By ensuring your prices align with how customers see them, you can make the most money and keep your customers happy.
C. Reasonable prices: Competitive pricing involves setting prices based on competitors’ charges for similar goods or services. This plan helps you stay competitive in the market, primarily if you work in a field where customers care a lot about price.
First, look at your competitors’ prices and set your prices based on what you find. You can meet their prices if your product has the same features and quality. On the other hand, you could raise your prices if your product is a better deal. For instance, if other coffee places in the area charge ₦1,000 for a latte, you could do the same or charge a little more if you offer something different or better.
D. Pricing for penetration: Penetration pricing involves setting low prices for your goods or services to attract customers and quickly gain market share. This method works exceptionally well for new companies entering a crowded market or releasing a brand-new product.
For example, if you’re starting a new online video service, you might offer much lower subscription prices than your competitors to get people to sign up immediately. You can slowly raise prices once you have a steady stream of customers. When you use entry pricing, you must be careful that the low price covers your costs first and that customers will still buy from you when prices go up.
E. Prices for extras: Premium pricing sets your prices higher to give the impression of being unique and having sound quality. This method works well if your product or service has unique benefits, high quality, or a well-known brand name.
For instance, if you run a high-end clothing store, you might charge more to show that the unique styles and high-quality materials you give are worth it. People who like luxury and are ready to pay more will be interested in your brand. When you set a special price, the perceived value must match the higher price.
5. Think about outside factors
A. The state of the economy: When setting prices for goods and services, it’s essential to consider the Nigerian economy. Things like inflation, exchange rates, and the security of the economy as a whole can significantly affect how you set your prices. For example, when inflation is high, labour and raw materials costs may increase, so you may need to change your prices to keep your profit margins the same.
Economic trends and signs are significant to keep an eye on. If the price of things rises, you might have to raise your prices to ensure you can cover your higher costs. On the other hand, when the economy is bad, people may be more price-conscious, so you should offer discounts or special deals to keep sales going. Keeping an eye on the economy lets you make intelligent choices and change your price strategy to stay in business and make money.
B. The legal and regulatory setting: It’s also important to know the laws and rules that apply to your business when setting prices for goods and services. Nigeria has specific rules about how prices should be set, and people who don’t follow them can face fines, punishments, or other legal problems. For instance, there are rules against raising prices too much, especially during economic downturns, and regulations that ensure prices are transparent and don’t confuse customers.
Read your business’s pricing rules and ensure your pricing plan follows them. For example, prices should be shown clearly, there shouldn’t be any hidden fees, and any deals or special offers should be transparent and fair. Also, consider any rules specific to your business that could affect your prices.
Legal and regulatory requirements must be followed at all times. This keeps your business safe from possible legal issues and builds customer trust. Your image will improve, and your long-term success will depend on how transparent and fair your prices are.
Including outside factors like the economy and the law in your pricing strategy will help you set competitive, profitable, long-lasting and legal prices for your goods or services. This method enables you to navigate the Nigerian market and reach your business goals.
6. Check your prices and make changes
A. Setting the first price: To ensure your prices are fair, you should test them in the market after setting them. By setting a starting price, you can see how customers react and how well your sales do. First, watch how well your services or goods sell at your set prices. Get comments from customers to find out how they see the value and cost of your product or service.
For instance, if you just released a new line of handcrafted jewellery, keep an eye on how sales are going and ask customers what they think. Customers: Are they ready to pay your price, or are they on the fence? Do they believe their money is well spent? This first step is crucial for getting information and seeing if your pricing plan works.
B. Change the prices: After you’ve tried your first prices and gotten feedback, be ready to make changes. You must change your prices based on how the market reacts to ensure they stay competitive and meet customer standards. If sales are lower than expected or customers keep saying prices are too high, you might lower them slightly to get more people to buy.
On the other hand, if your goods or services are selling out quickly and people think they are worth a lot, you can raise prices a little without losing users. You can also use sales and deals smartly to bring in new customers or boost sales during slow times.
If you see that a particular product isn’t selling well, you could offer a short discount to get more people to buy it and give you more feedback. On the other hand, if a service package is trendy, you should add a version that costs more to make more money.
7. Tell people what your prices are
A. Transparent pricing: It is essential to be clear about your prices when you set them for your goods or services. Being honest with your customers helps them trust you and understand what they get for their money. Make your prices clear everywhere you sell your goods or services, like your store, website, and social media pages. Ensure that all prices are transparent and that there are no extra fees that your customers might not know about when they check out.
Say you have an online clothing store. Make sure the price of each item is marked and that any extra costs, like shipping, are explained to the customer before they finish their purchase. Being honest about prices lowers the chance that a customer will be unhappy and helps you build a reputation for being honest and dependable.
B. Dealing with price objections: Handling objections to them is another vital part of sharing your prices. Customers may wonder if your goods or services are worth their price. Being ready to answer these questions can help you keep their trust and interest.
Pay attention to what your customers say and give them clear, reasonable reasons for your prices. Highlight the benefits and unique selling points that make the cost worth it. For example, if you sell high-end skincare items, you should talk about how the good ingredients and research-backed formulas help them work better, making them worth the extra cost.
Also, consider offering customers different payment methods or financing options to make the price more manageable, especially for more expensive items. This may increase the number of people who can buy your goods or use your services.
Read Also. What Are The Consequences Of Poor Customer Service For Nigerian Entrepreneurs?
Conclusion
If you want to be successful in business in Nigeria, you need to learn how to set prices for your goods and services. Your business can be competitive if you know how much things cost, who your customers are, and how to set your prices. To build customer trust, consider outside factors and be clear about your prices.
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