Product pricing is important in every business; it determines the revenue you’ll receive and the overall success of your trade. It is, however, also one of the most difficult decisions to make. Below are three major elements that will affect the value of your item.
At this point of your business, you should already know your target market or the group of people you’ll be dealing with and gaining revenue from. With this information on hand, it is essential to know more about them before pricing a product.
Undertake some sort of market research by conducting informal surveys and scanning business trends. Doing this allows you to further explore your market and segment them by demographic, interest, budget, and price sensitivity. If your market belongs in Class A and B, then you may fairly increase the price of your product. If they are part of Class C or lower, then you should rethink the amount you’ll charge.
One of the reasons why you’re building a product price is because of competition. Besides, your customers will probably look at your competitor’s pricing, so why not do that too? Compare both of your products and check if your item has an additional value. Do you offer other services that come with your product? Is your product of higher quality? Competitor price monitoring allows you to stay ahead of the competition and gain more profit in the long run, according to PriceManager.
You are selling a product mainly because you want to make a profit. But how can you increase your revenue when your product’s price does not cover your overhead costs and the literal cost of the item? Don’t give your business for free. Your products should cover fixed costs like rent and variable costs like shipping or stocking fees. It should also give room for actual profit. Do this by creating a spreadsheet of your monthly costs and computing your item’s actual price plus your target financial return.
A thorough research about your industry and a deep understanding of your business are essential in determining the price of your product. Take a comprehensive look at your market, competition and costs, and gradually gain revenue from your trade.