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Tips for Creating a Pricing Structure for Your Business.

There are different sides to a business and the pricing is an important aspect that affects sales flow negatively or positively. There are probably certain things that are easier to price; however, if you are a service provider or manufacturer, it is much more challenging determining how to set the prices. And if your prices are not correctly set, you either charge more than your target audience can afford or you miss out on the profit you should be making. 

So, how do you find a balance? That’s where knowing the right strategies for creating a pricing structure for your business comes in. If you’ve tried to do it, you’ll know it can be overwhelming. But not to worry; the steps highlighted in this article will guide you in creating a pricing structure that is sure to properly position your business.  


Before you set your price, you should do a market analysis to know the general pricing structure of your industry. Check with your competitors and study their pricing structure in details. Find out why they are using that strategy and how it applies to your business. Of course, you don’t have to do things exactly as your competitors are doing but it will give you a bearing when creating your price structure. Also, you need to find out things like industry standards, regulations, and local laws. Besides that, you need to put the cost of production in mind; electricity, water, logistics, rent, marketing, employee payroll, taxes. All these make up your business expenditure and should be considered when creating a price structure. After all, no business can survive if the expenditure is more than the income. 

Determine Your Target Audience

At the end of the day, if your target audience cannot afford your products, it will affect sales. So, the first thing you should do is determine your target audience, then get to know them. What is their income level? Where can you find them? How much do they need what you are offering? How much are they willing to pay for it? You can do this by reading research materials, doing a survey or asking them.

Creating a pricing structure

Define Your Business Goals

What are your business goals? This will also determine the price structure because the pricing structure of a business that wants to penetrate the market should be different from that of a business that wants to increase cash flow. If you want to penetrate the market or increase your brand awareness, for instance, you might make your price cheaper than that of your competitors until your target audience knows about your products and if the latter is your goal, you might increase your price to increase cash flow. In the same vein, whatever your business goal is should be defined when setting prices. 

Choose a Price Structure

Your price structure should be dependent on the structure of your business. The reason a price structure is important is that it helps you organise and simplify your prices so the customers can understand. Some of the popular price structures are explained below;

  • Flat Rate: This is setting a fixed price and that’s why it is great for businesses with a single product or service-based businesses that charge hourly.
  • Tiered Pricing System: In this case, you set prices on different products depending on their value. Consequently, the more valuable the product, the more expensive it is. 
  • Razor-blade Pricing: This is when there is a parent product you set a price on while you make profits from other products associated with it.
  • Pay-Per-Use: This pricing structure works in the way whereby you pay as you use the product.

You should research the different price structures and see the ones that will work great for your business.

In conclusion, don’t be afraid to try and test different prices and pricing structures. You never know until you try. However, make sure to gather accurate data, so you can see what strategy needs to stay and that which needs to go. 


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