Pricing Strategy for Services and/or Products

Learning Objective: Learner will integrate service offerings with business-building strategies.


Pricing Strategy for Services and/or Products

Overall business needs to be profitable to be successful. Pricing strategy for services and/or products is critical in ensuring a business will have the appropriate level of funds to be viable. There are numerous variables when determining pricing strategy.


Step 1: Competitive Analysis

Review numerous local businesses with similar offerings.

  1. Understand the demand for the new service and/or product.
  2. Understand local competition for comparable new service and/or product.
  • Pricing structure; clients willing to pay
  • Marketing approach; how is the service and/or product being promoted


Step 2: Cost Determination

Determine all associated costs both direct and indirect: labor, products, marketing, rent, and overhead.


Step 3: Strategy Determination

  1. Generate profits.
  2. Loss leader to cross promote profitable services to build overall business profitability.
  3. Introductory pricing to build a clientele for new service and/or product.
  • Promote with the terms “limited” or “introductory pricing.” This allows

the client to realize that the prices may change in the future. 


Step 4: Set Price

  • Price for profitability: Price must be greater than all direct and indirect costs.

a. Pricing too low will undervalue the service and not be profitable.

b. Pricing too high may limit clients that can afford the service and have a low demand.

  • Price for business building: Price may not cover cost, but the strategy is to grow the overall business.
  • Support a "starting at" structure, with a flat rate increase to differentiate new talent from a senior wellness provider and maintenance services from a first-time client.
  • Series pricing will provide a discount to a client if the client prepays for future services. This is effective for developing customer loyalty.
  • Package pricing will provide a combination of compatible services which is pre-packaged and has a set price.

a. Pricing could include tips to be all inclusive, which is great option for gift giving.

b. Pricing could reflect a discount but is not a requirement. 


Step 5: Perform Profitability Analysis


Once you have collected the relevant data, then set up a profitability analysis. This representation will allow you to establish a guideline for pricing.