The excitement of adding a new product to your inventory can easily be overshadowed by the worry of the exact price you will pay for your product.
Expensive, but you can put yourself out of business and therefore not sell any business. The price is low, and your audience may think your product is too expensive to be good – so you’ll still make any sales. On the other hand, you may get a lot of sales but poor profit that will not support your business!
Pricing your product is about striking a balance, but in reality that’s often easier said than done. Understanding how to price your product is the foundation of your business’s success.
There is no magic formula for pricing your product as it will depend on many factors:
- your product
- Your production costs and professional expenses
- Your target market
- Your financial goals
- The prices of your competitors
Every company will have different answers to these points, but even then, pricing your product isn’t just about numbers. In fact, math is probably the easiest part of the whole process. It’s really easy to calculate the cost of your product in theory, because it’s a simple equation based on your desired profit margin (your selling price minus your expenses):
- How much do you want to earn? Let’s say $5 per unit sold
- What are your total costs and expenses? Let’s say $20 per team.
- Sale price: $20 (total amount you spend)
- Selling price to get a profit of $5 per unit: $25
You need to understand that the price of your product is what will support your business and therefore a good profit is important. If you’re running at a loss or just “making money” (break-even), rebuilding your business will be a long and hard road.
So, in theory, you should price your product taking into account the desired value. But how do you know that you will be able to price your product at, say, $25 and it will sell at that price without difficulty?
You do not. Not without considering all the other factors involved when deciding the price of your product.
But before deciding on your product pricing strategy – and there are a few – there is one super important point that you need to prioritize using information readily available to you for free.
How much is your target customer willing to spend on your Product?
You should never try to price your products without first doing some market research. Yes, it may take time, but it is a worthwhile step because understanding the price your target market is willing to pay for your product is key.
- First, use your competitors’ prices as a starting point to estimate the market. You should choose similar products to get a fair comparison.
- Then conduct a non-public poll or survey via email or social media asking people what price they would be willing to pay for the product (hypothetically).
- You may have other companies collect this type of marketing data from you.
The information you are looking for when pricing your product is an idea of what most of your audience would expect to pay for your product. During your research, it is likely that the price you will receive may be in the range, but this gives you some starting points to work from, and you can use this information to help with Your product pricing strategy.
Basically, whatever pricing strategy you use, as long as it fits your search criteria, it’s worth trying.
Remember that your final investment is not set in stone! Just because you start a product at a price doesn’t mean you can’t change it – in fact, you will make changes due to customer demand, changing costs, or expenses and of course people’s behavior. your competition. .
To stay on top of your product pricing, you should closely monitor your customers’ buying habits and be prepared to adjust prices when appropriate.
So, once you’ve got your pricing metrics from your initial market research, how do you decide on your product pricing?
How to Price Your Products: 5 Things to Consider
- Know where the market is going
Do you regularly check company news, read white papers, follow market trends and new or improved product introductions? If you don’t, how can you spot patterns that could affect future demand or sales of your product — and, ultimately, your price?
Changes in the market are one of the main factors that can cause you to change prices. For example, if your product is seasonal, such as summer clothes, bad weather will affect sales – and prices.
If you are in the beauty niche and the product or product is being redesigned, you may have less time to sell the current product.
If your product is not environmentally friendly, you can make price adjustments to meet the ever-changing needs of the public.
Things will always vary from niche to niche, so it’s important to be aware and adjust your pricing based on popular decisions based on current market trends.
- Check your prices
Not only do you need to monitor the market and know where it is going, but also the price of your individual products. In other words, is each of your products worth it? It’s different from looking at your brand as a business as a whole.
Remember that your financial goal – which is part of how you will determine your value – should be contributed by all products, not just one or two sellers.
Analyzing the prices of your competitors is the easiest way to be aware of price changes, which in turn will help you determine the price of your product. You don’t need to watch them every day, but do some important checks once a week is enough for you to find out any significant price changes and analyze their reasons.
You should also receive regular feedback on your pricing from your customers. Send an email, invite them to take a poll or survey in exchange for a voucher or other incentive. The opinion of your ideal customers is important because they are already invested in your product. The upside is that by doing this, you also show that you care about your business, your reputation and your customers.
- Always increase your prices
So let’s say that you have set your price, you keep your competition up to date, you know every new product is on the market, and your product sells at any price.
Should you raise your prices – or is it a risky move?
The correct answer is that you should not be afraid to try new prices, offers or combinations (such as packages – more on this soon) that can help you sell more products and ultimately account, to increase your profit.
There may come a time in your business when you have to raise your prices, because if you don’t, you’re not doing your business with the right mindset for the future.
So, raise your prices and try out new offers every month and check out any promotions or discounts on orders. You’ll see a quick reaction anyway, but it’s good to know that you’ll find that price increases respond quickly during economic booms! What’s really interesting is that if you see your competitors raising their prices and yours, you know you’ve made a positive change at work!
If one price or offer isn’t working, don’t panic, try something new. Continuous testing and monitoring is key to staying competitive in your niche, but also getting the benefits you deserve.
Tip: Don’t alienate your customers by dramatically increasing your prices overnight. Take small increases over time rather than one big increase. It is less visible, less intimidating to customers and more easily accepted!
- Reduce your costs only when necessary
Cost cutting is generally not a good strategy – unless it is done for strategic purposes. For example, you may be trying to grab market share quickly and having a lot of competition will do that.
Maybe your competitors have lowered their prices and you’re following suit, although that doesn’t mean you should.
Perhaps you have too much inventory to throw away or a discontinued line. All of these are valid reasons why you might think you need to lower your prices.
The practice of raising your prices and trying different offers will not always be successful. If you’re paying too much, you might be missing out on your target audience, but that doesn’t mean you have to lower your prices right from the start.
Instead, keep your prices high, but include freebies to entice buyers to try your product. It also works to create interest in your product and of course, your website. Everyone loves getting something for free, so by adding a freebie, your customer feels like they’re getting more value for their higher price – and they don’t have to worry about it. them for paying it!
- Use a package pricing plan
“The connection” is happening all the time, right under your nose, but you probably don’t recognize it as such.
This is where you see many products being sold as a package, for the same price. For example, a pack of three t-shirts, or five pairs of socks, two pillows. or related products such as sets of brushes and combs,shampoo and conditioner and sometimes complementary products like wallets and purses or laptop consoles with games.
A Harvard Business School study found that related product packages can help products sell better – and you can use this strategy to increase your sales based on “perceived value”. Value analysis is simply an evaluation of a customer’s product or service compared to similar products.
When a customer thinks they’re getting value, they’re more likely to think about price. So you can bundle more products and set your prices this way – often higher than your competitors – while still selling.
Another advantage is that you offer something unique, which makes it difficult for buyers to consider the prices.
Financial advice: Don’t forget to review your debt regularly! To be able to trade and sell for profit, you need to buy your shares at the right price. If you’re having trouble selling at an acceptable profit, consider negotiating with your supplier for a higher margin, or look at other fees and charges related to your break-even price. If you can reduce them, you will have more opportunities in determining the value of your product.
Understanding your market and testing that market is the key to learning how to sell your product to ensure sustainable business success. By pricing your products and adjusting regularly, you’ll find the most flexible prices. The best results can be achieved through continuous monitoring.