Setting price on your products or services is one of the weightiest decisions you’ll make in your business. It will touch every part of your business from the financials to how you are perceived in the market place.

Yet often scant attention is paid to the psychology and marketing potential of price. The price of your product is a critical positioning indicator.

Do you think when they go to set price on a Rolls Royce or Ferrari, they just add up the bill of materials and then just add on an acceptable markup? Hardly. Price is central to the positioning of the product. If you position yourself as an educator and a trusted adviser price becomes much more flexible.

More often than not, business owners set prices based on what their competitors charge.

A common application of this is setting price slightly lower than the market leader in their industry. Another common way that price is set is to just take cost price and then add what feels like an acceptable markup.

Both of these are acceptable starting points; however, if you aren’t thinking about the marketing or the psychological implications of price then you are likely leaving huge sums of money on the table.