Date added: 11/23/2016 How to Get Your Product's Price Spot on!
Pricing is a critical, yet pretty overbearing part of any business. No matter what product your company deals in, getting the price right can be the difference between making a million sales – and making none.
You don't want to overprice your product and get little or no customers or even under-price your product and leave money on the table.
There are tons of pricing strategies and guides, but determining price involves five typical steps:
1) Determine Costs
Before you even begin contemplating a number as the product price, you must first determine the exact cost of production for your product. Also, you need to work out all the costs incurred in running your day-to-day operations.
It must include all the costs you will incur in a month (fixed costs) as well as costs incurred in production per unit of the product and its delivery to the consumer. You need to price your product once these details are figured out.
2) Know Your Customers
You need to have a clear idea about who your customers are. You have to be able to determine the price that they would be willing to pay. Check the current alternatives available in the market. Three critical questions you need to answer are:
What is the difference between that and your product?
Will a consumer be willing to pay the difference to use your product instead?
Is the value proposition attractive enough to warrant the price you have in mind?
3) Positioning & Branding
You have to decide how you want to position your brand in the marketplace. Determine if you want to be a high-end player or a brand with mass appeal. What are the price points that correctly reflect the positioning you are targeting?
4) The Competition
The price of a product is ultimately decided by the market. The competition may be willing to produce a product of the same or better quality at a lower price, and this may make it difficult for you to compete in the market. You need to have a clear idea about the strengths and weaknesses of your competition and a strategy to counter them in the long term. If you sell store fixtures, one example may be the pricing of your floor banner stands. If any are commodities, they will always be affected by the competition.
5) Profit Per Unit
The lifeblood of any business is profit. You cannot run a business in the long term without making a profit. You have to decide the percentage of profit you want to make and if your product can be priced to give you that amount.
In the beginning, you may not be able to charge this amount as you look to gain market share but you must have a clear road map to achieve this target profitability over a proposed timeline.