"The overarching goal of marketing is to satisfy an unmet consumer need in a way that will ultimately deliver profit to the bottom line," explains Michael Goodman.

Once you have identified a real customer need that your product or service can satisfy, learn everything you can about your potential customers. What do they need and want? How do they make purchasing decisions? What are the criteria they use? Are they loyal to one brand, or are they swayed by price or convenience? Is the product an impulse purchase or something given considerable thought? How frequently is the purchase made?

Potential customers have a clear idea of how they want to spend their disposable income. And each customer may have a different concept of how to get the most value from their money. Goodman describes value as:  [perceived benefit] divided by [price].

Does this mean that lowering the price of a product will enhance its value? Sometimes but not always. Research shows that if customers believe a certain product is superior, most people will exaggerate the perceived benefit so they can justify paying more for the product. They want to pay more since this demonstrates they recognize superior performance.

The Po!nt: A key step in setting prices is understanding the perceived benefit your product has in the minds of your customers.

Source: MarketingProfs. How to Set Prices the Smart Way is the next seminar in our Small Business Series. It airs this Friday at 3pm Eastern.

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