You have a great product but you don’t know how to set the right price for it? The success or failure of a business largely depends on the pricing strategy you adopt. Using Effective pricing strategies can help your product gain traction and generate sales, while the wrong strategy could lead to lost sales or even bankruptcy.
You need to be able to set your price at a balance; not too low because you might run at a loss or customers think it’s inferior and not too high so it is not beyond their purchasing power.
As a business owner, you have to set a price on your products in a way that balances with the value your customers get from buying them. Sometimes you often look at competitors to set comparable prices or even lower because you think it will give you an edge.
There are a lot of variables to consider before setting your price. you should consider the costs of labor, resources, and even profit.
If you’re not sure what effective pricing strategies look like, read on for seven options that have helped other businesses succeed.
So how do you set the price for your product the right way?
Know your costs
The first thing to consider is that you know your costs and ensure that the pricing covers that cost then includes your profit. You need to know the cost of your product per unit and consider how many units you need to sell in order to make a profit, you should also put your overhead costs like rent, utilities, office supplies, salary, and wage into consideration when setting the price.
Know your customers
You should also factor in how much your potential customers will be willing to pay. When you know how much they are paying for competing products and services you can then factor it in when determining your costs as stated above.
Be sure that the competing price covers your costs with a margin for profit. Do not just outrightly set the price because that is the competing price.
Understand the market
While the market can be pretty unpredictable, you can track the external factors that will impact the demand for your product, prices are also affected by internal and external factors.
There are also market conditions that influence product pricing, such conditions include monopolistic competition, pure competition, oligopoly, and pure monopoly.
Know your competition
When you’re trying to determine your product’s price, it’s important to know what other products are selling for and why. You can use this information as a guide by comparing yourself with others in the industry.
For example, if you’re selling an app that helps people find coupons, compare it against other apps that have similar functions like Groupon or Living Social Coupons. If they are cheaper than yours, then maybe there is something wrong with your pricing strategy!
If there aren’t any competitors yet on the market, then this may be an opportunity for innovation!
Consider cost-plus pricing
You should express your break-even point by adding a margin or markup to your cost price. Once you have achieved a price, compare it with the industry standard.
One of the limitations of cost-plus pricing is you cannot assume you will sell all units of your product, you can make projections but leave room for a give-or-take situation. Cost
Consider other factors
There are other factors to consider when setting a price, consider how VAT will affect your price, and will the pricing allow customers to make late payments?.
When you consider all variables that you affect your cash flow, does your pricing give room for flexibility such that your business is not immediately disrupted if the cash flow is affected or you do not sell up to the proposed quantity? These will help you put your pricing into perspective.
All the variables that you put into consideration before setting your prices do not always stay the same, Your costs change, your competitors might change, and even your customers. Be sure to constantly monitor these variables regularly to make sure your prices are the best point that is healthy for your business.
You should work at getting the right price for your products as it sets you on the path towards success or failure, so you should consider all the factors that are needed to set pricing in order to achieve the maximum result. With the right pricing strategy, you are on your way to building a successful business.