How To Price Your Products & Services For Success In Any Market
Pricing a product or service right is a key decision every entrepreneur must make. This process is usually done with a certain number of factors covered because if the price is too low or too high, the business could suffer, and eventually end up a failure.
No matter what marketing strategies and branding efforts are put in place to sell your products or services, early on you must also consider setting the best price that will determine the cash flow, profitability, growth, and eventual success of the business.
How then do you price your products and services for long-term success?
Depending on what product or service you’re selling, the pricing structure will always vary, but the method of pricing will remain the same.
If you’re looking for how to price your product for long-term success, here’s a 5 step process to follow:
Step 1: Calculate Your Unit Cost Per Product Or Service Sold:
Before you can set a price for your products or services, you need to first calculate the total amount you spent in producing, acquiring, or creating that product or service.
This cost, which is usually inclusive of transportation costs, raw material costs, direct labour costs, and much more will determine the exact unit price of the product or service, which will then enable you to price the product or service reasonably enough to enable your company get profitable and subsequently grow.
Step 2: Determine The Value Of The Product:
The next thing is to
To understand the value, you’d need to carry out a market research in which you’d have surveys and more to determine what people think of the service.
How much would they be willing to pay for it? What social perception does it have on them? What’s the most and least amount that would turn them off?
When you understand what your product or service is worth to your market, pricing it right after estimating the unit cost of production would be much easier.
Step 3: Find Out How Much Your Competitors Are Selling At:
After you’ve determined what the product is worth to your consumers, you need to now determine what your competitors, if any, are selling at.
No matter the type of commodity or service being sold, there will always be companies selling at very high prices and some selling at very low prices. You can see this trend in fashion, automobile, real estate, aviation, and much more industries.
Find the competitors selling a product similar in value to yours then based on their price, you can determine how to price your product to draw the specific type of customers you want to you.
Step 4: Determine What Percentage Profit You Intend To Generate:
Depending on the unit cost, value, and price your competitors are selling at, you could price the product at a profit of 30% or in some cases, the product could be priced at over 150% of the cost price.
When you determine the best price your customers are willing to pay for a product or service, you can then choose to either slightly price it lower than your competitor’s or price it higher for a show of supreme brand value.
Step 5: Price The Product From An Emotional Point:
Since you’ve determined what percentage of the price you intend to generate as profit, setting the price of the product from a persuasive point of view will motivate some prospects to act immediately.
For instance, you could price a $4,000 product for $3,950, a $100 product of $99, a $1,500 product for $1,450, and so on. Most consumers tend to act on this since it unconciously makes them believe it’s not hitting a threshold beyond their financial capacity.
When you’re reasonable and still persuasive in your pricing strategy coupled with other marketing strategies to grow your sales, successfully selling your products would be a lot easier.