When you run a business, choosing a price point that is right for both your business and your customers is essential. After all, this will form the whole basis of your company and it is important that you consider your decision from every possible angle.
The entire process can be made easier by price mapping products which give you a great guideline to work from. Here are some of the main considerations that you should make when pricing your products.
Obviously, the price of your product needs to generate enough revenue to cover your costs, so you need to take all the different factors into account including cost of your raw materials, assembly, labour, shipping, and any other overheads you can think about factoring in. Once you have calculated your average cost per product, you will be able to see the revenue needed to cover all your expenses. Of course, you then need to add your profit margin onto the top of all this, and you don’t want to miss out this crucial factor!
Knowing your customers very well will help you to price your products to suit them. Are they bargain hunters or will they splurge on high quality products? Do they search for personalised items ahead of ones which have been mass produced? Answering questions like these ones can be done through database, survey and internet research. The better you know your customers, the more likely it will be that you will choose a price point that suits their needs and desires.
Examining the competition carefully is essential no matter what industry you are in. After all, you want to choose a price for your product that is competitive, but still reflective of the quality of what you are creating. After this, everything depends on the strategy that you are looking to take. Perhaps you are planning on undercutting them to attract their customers or you want to mark up your product to reflect its quality.
Maybe you have a product that varies in value depending on the added features and extras that come included with it. This allows customers to choose a product that best fits the budget that they have to spend. Offering multiple options helps to capture a bigger percentage of the marketplace as it makes it seem more like you have something for everyone.
Odd Number Pricing
A strategy that has been around for a long time is to take a penny off the price to make products seem more appealing to potential customers. Although it is well known and has been around for a long period of time, studies still show that it is an effective way of appealing to customers and thus a strategy that you should look at adopting yourself.
So, when it comes to pricing your product, make sure to consider all of these factors to ensure that you get it right and it works for your business.