The Internet can create pricing quandaries for small businesses. How should you price your product when you sell direct though your company Web site and ALSO through your channel partners at retail stores?

Appealing as it might be, selling your product for less on the Web could alienate retailers who carry your product. Yet, explains Michael Goodman, "You still want to capture those delicious full-revenue sales where you get both the manufacturer's margin and the retailer's margin."

Retail stores already have customers. Once you start selling on the Web, you'll need customers too. This makes you a retailer—which means you will incur the same costs as your distribution partners: A merchant account so you can accept credit cards; advertising to draw customers to your site; and staff to fill orders and answer questions.

You might consider setting up a retail division of your company on paper, and selling to that division at the same wholesale prices you sell to your retail distribution channels. You can then price your product on your Web site at the same price a consumer would pay in a retail store. "If you want to throw in free shipping, that's fine … as long as there's enough margin to cover it," cautions Goodman.

The Po!nt: Selling products on both a Web site and through retailers can give small businesses a greater appreciation for how retailers earn their income selling your products.

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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