If you own a New Zealand business, chances are you provide a good or service. Selling goods and services is how your business makes money, so it is important that you know how to do this. One of the most important parts of selling products is knowing how to price them. Businesses employ many different systems to price their products, so you must use the method that best suits your business. This article will explain how to price your products in New Zealand.
What are the Different Types of Pricing Models?
Percentage Fee
A common pricing model is where a business will charge a percentage fee per unit or transaction. This is common for businesses that charge a commission. For example, stock broking platforms may charge a percentage fee on every transaction you make. Customers benefit from this model when they purchase more from the business as it will become cheaper for a customer when the magnitude of use is larger.
Subscription
Another common pricing model is to use a subscription. This is prevalent among businesses that provide software as a service products. This model allows the business to keep earning as long as their customer uses their product. For example, music streaming websites often utilise a subscription-based model.
Hourly Rate
Many small businesses utilise an hourly rate model. An hourly rate is a popular pricing model when the time to complete the work is uncertain or if the work is labour-intensive. The hourly rate you set will depend on the type of work you are conducting. An hourly rate pricing model is beneficial as it means you can continue charging your client if a project takes longer than anticipated.
Fixed Fee
Finally, the most common pricing model you will encounter is a fixed fee model. In this model, a product sells for a predetermined fee, with no recurring fee. This model benefits the customer and may allow your business to sell more volume. Furthermore, you can offer your customers a discount if they buy in bulk to encourage your customer to buy more of your products.
How Do I Determine What Price to Charge?
One of your business’ most challenging decisions is determining how much you should charge for your products. This is because it may determine the amount of sales your business makes. To determine how much you should charge, first, determine your costs. Once you have established this, you should pick a markup that aligns with your industry.
Continue reading this article below the formPricing Laws
Ensure that your pricing aligns with New Zealand’s pricing laws, specifically the Fair Trading Act. This outlines that representations about your product must be accurate and honest. This also applies to pricing, so if you are stating that you are discounting your product by a certain amount, this must be accurate. Additionally, you must ensure your customer knows about surcharges before purchasing something. An example of a surcharge could be a public holiday surcharge.
To protect your business, ensure supplier contracts meet your business’ needs. Our free Commercial Contracts Checklist will help.
Review your Pricing
You must continue to review your pricing to ensure that it is in line with the market and that you are receiving enough sales. Consider lowering or changing your pricing model if you are not selling enough. Alternatively, it may be a marketing problem.
Key Takeaways
As a business owner in New Zealand, you are likely trying to figure out how to price your product. This can determine how successful your business is and how many sales your receive. Avoid pricing your product too low or too high to ensure it is attractive while guaranteeing your business makes a profit. There are different ways that you can price your product. This includes charging a subscription, percentage or fixed fee. Whichever model you choose, ensure you consistently review your pricing so that you can alter it if need be. You should also ensure that you comply with pricing laws in New Zealand.
If you need help with pricing your product, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
Frequently Asked Questions
Yes, you can choose any type of pricing model as long as you comply with pricing laws.
Yes, you must include GST in your price displayed in New Zealand.
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