When you start a new business, pricing your product becomes a herculean task. You are new in the market and you don’t know how much price to ask from customers.
But this is just a tip of the iceberg!
The scenario often becomes more complicated if market competition is intense and new entry to the market is very much restricted.
On such occasions, you need to be very strategic in pricing your products. Take one bad decision and you may ruin your reputation at the very beginning of your journey.
You need to follow a guideline to price your products. In this article, we will share some proven strategies to price your details wisely.
11 Things to Consider in Pricing Your Auto Detailing Business
We will discuss in the context of auto detailing. But you can use similar strategies to price different products in different business. The basic outline is pretty much the same.
Auto detailing includes services related to cleanup, repair and decoration of motor vehicles.
Nowadays, we see many young folks starting their own business of auto detailing. Initially, they begin with lot of enthusiasm. But due to their lacking to effectively price, service and behavior, they fail to establish their business.
So, below are 11 important things that you should consider before pricing your details.
1. Do Your Research!
The first thing to do in every business is to conduct a thorough market research. If you are in auto detailing business, your research should at least cover the following things.
- Study the area in which you will provide your service. Check out how many people own vehicles and what kind of vehicles they are using.
- What are the financial conditions of majority of the population in that area?
- How often do people go for auto detailing?
- How intense is market competition in that area and what price your rivals are charging?
- What services most of other competitors are offering?
- Which services are most popular? Where can you do better than you rivals?
Remember, if you study the market well, you’d be able to understand what your customers want. So, you will have higher chance to succeed.
2. Set Business Goals
This is another important aspect for every businessman. You should set some general and specific goals for your business. Keep some realistic target for your trade.
Ask yourself the following questions.
- What should be your initial goal to make a name or to earn profit right away?
- What kind of service you wish to include in your business after 1 year?
- How many year it will take to reach the break-even point?
- Where do you want to see your business after few years?
- What is your ultimate goal with this business? Do you plan to sell this business after few successful years or do you want your business to flourish and make more branches?
- If your business incurs loss or suffers accident, what is your alternative plan to save your business?
The goals need not be precise, but you should have some general idea. Check on your business goals every so often. You can’t be a successful businessman without having higher ambitions.
Everything will not go according to your plans, but having some well-defined targets will save you from anxiety and depression. In emergency situation, you will not freak out and remain optimistic.
3. Know Your Limits
The next thing to consider is setting up different service schemes. Determine what kind of service you will be offering. It is good to have different packages such as basic package, premium package, student package etc.
Auto detailing work ranges from car washing to interior designing or exterior detailing. It covers technical works as well as decorative works. So, you should determine the services you will be offering before setting their price.
4. Analyze Your Costs
It is probably the most important thing to consider before pricing. Determine what are your fixed costs and variable costs.
Fixed costs are the costs that you have to bear no matter what happens. The rent of your shop, the salary of your employees, the cost of purchasing machineries, the renewal charge of your website or software; all comes under the fold of fixed costs.
Variable costs may not be the same every month. It will fluctuate depending upon usage. For example, the utility bill in your shop or the cost of purchasing shampoos for each car wash are examples of variable costs.
In analyzing costs, you should also determine how much time you will be needing for different type of service. Because in business, time is equivalent to money.
5. Choose Your Minimum Wage
You need to ask yourself what is the minimum wage you will accept for your hard work. You don’t need to disclose this price to customers. But, this will be helpful for you to make strategies and offer discounts during the initial years of your business.
6. Start With ‘Below Competition Pricing Strategy’
You may ask, “Why should I offer less price?”
The answer is obvious. You are new in the market. The first thing you should do is to make a good reputation. So, initially you should offer lower price than your competitors.
Analyze your costs and gather data to know your competitor’s pricing before setting your price.
If the competition is intense in the market, it will be difficult to offer less than other rivals. Never offer a price that will incur loss in business. You are here to do business, not charity.
You shouldn’t offer lower price for a very long period. Otherwise, customers will predict that your service is poor and won’t come to you for premium servicing. Thereby, after making a name for yourself, you should increase the price to meet the benchmark price.
7. Offer Your Customer a Range of Price
You may see some detailing store to charge their customers on hourly basis. But this type of pricing make the customers insecure.
Since customers do not know how much time it will take to detail their vehicle, they can’t estimate their costs. So it is better to offer them a price range.
Let me give you an example. Suppose, it takes 4 hours to do basic detailing work in a Toyota car and the minimum hourly wage you expect is $20. So, your minimum price for detailing work is $80. Now you can tell the customer that, it will probably cost $90 to $110 to do the detailing work of this vehicle.
In that way, customer will feel secure that you are not overcharging. You will also feel relieved for having the freedom to cover up any extra costs if needed during your work.
8. Engage with Your Customer and Offer them Discount
Offering a customer with a range of price will offer windows of opportunities for you. You can engage with your customers and ask them whether they need any specific service or not. Offer them complementary drinks. Sometimes offer them discount and free services.
Your main motive is to build a strong relationship of trust, faithfulness and reliability with your customers. If you can manage to win the goodwill of your customers, your reputation will skyrocket soon.
9. Evaluate Your Worth in the Market
You can’t offer the minimum price forever. So after passing initial few months, you should evaluate the value of your service.
Check out how satisfied your customers are. Rectify upon your mistakes. Remember, good businessmen always evaluate themselves in the market and modify their business as per market demands.
10. Offer Higher Price Range Once you are Set
Once you are certain that your demand in the market is going up, you should shift the gear up. You should start offering a higher price range for your services.
Do not raise the price too high. Gradually increase the price. Charge according to the value of your services.
Do not forget to give your regular customers some sort of facility upon price increase. You can give them loyalty discount or notify them well ahead of the rise in price.
11. Use Various Strategies
A successful businessman is very adaptive to changing situations. He is versatile in his approach and can read the minds of his customers pretty well. He knows that he should review his pricing strategies regularly.
He should shake up the price once in a while. Here are some proven pricing strategies that you can apply temporarily to attract new customers.
Multiple Pricing Strategy
This service basically offers multiple service in the price of one. For example, it may cost $5 for car wash and $10 for exterior detailing that includes polishing, waxing and shining a car. So the total cost for car wash and exterior detailing should be $15.
Under multiple pricing strategy, you will provide all these services for a cheaper price, say only $10.
This strategy is useful when you are introducing a new service in the business or when you are improving some of your existing service. And, you want customers to test the service.
Psychological Pricing Strategy
In real world, human mind does not always act rationally. Researchers have found that, sometimes pricing your product tactfully can increase the demand for that product or service.
For instance, you may experience that more people are coming for car wash after changing the price from $5 to $4.99.
Loss Leading Pricing Strategy
Sometimes, sellers offer big sale on certain products. As a result, more people start coming in their shops and end up buying other items as well. Many grocery and mechanic shops use this technique.
You may offer big sale on interior detailing and witness that people are coming in big numbers in your shop. They will come to your shop to avail the sail but evidently end up taking other services.
Above Competition Pricing Strategy
Increase the price of your top service and set it above the market price. Advertise that, you are offering more premium service. Customers will feel that they are getting a luxurious, premium and exclusive service by paying higher prices.
It will create a halo effect as more customers will flock to avail this service.
You should study the market and your service thoroughly before experimenting any of the abovementioned strategy.
To Sum Up,
Your first goal is to build reputation in the market and attract customers by offering them lower prices. After gaining trust and affection of customers, quantify the value of your service by increasing the price.
You should revisit your pricing strategy often. Remember that, sometimes you may incur losses while experimenting new strategies. Never be shy of trying out new things.
Your experiment may backfire in losses. But in business, sometimes you can learn great lessons even after incurring losses. So, do not be disappointed.
Keep trying new things until you find your profit making niche.