Whether you are selling a luxury brand or a basic model of anything, the product has to be at the right cost. This is one of the keys to business success. If you get the pricing wrong, not only will potential customers turn away from your products, but you may set up additional issues that your business could struggle to recover from. There are so many different pricing strategies around, but how do you make sure that your product is at the right price?
Finding The Right Pricing Strategy
There are a handful of pricing strategies, from market penetration pricing, price skimming, economy pricing, psychology pricing, bundle pricing, and premium pricing. Another component is cost based pricing, and you can find a cost based pricing example here, but it is about where a fixed sum or percentage of the total cost of creating a product is added to the selling price. This can work with premium pricing but with each pricing strategy, there are a veritable amount of pros and cons. You need to find the right one for your product.
The Essentials To Know
You always need to cover your costs, and with costs like raw materials, rent, and so forth, you need to factor all of this into account, and cost based pricing is a good method to ensure that you are covering your overheads. But you also need to know the revenue target. You need to estimate how many units of a specific product you expect to sell over the next 12 months, you then divide your revenue target by the number of units that you think you will sell, this gives you the price you can sell the product at. It’s also important to take note of the competition and where the market is going. You need to think about how the market is willing to pay for the product, in comparison to what your competitors charge.
Remember The Goal
It’s very easy to be competitive, because you’ve got other businesses selling a product for a little bit cheaper. But you need to remember it’s about making money. This doesn’t mean you should charge above and beyond, but if you underprice a product, this could impact your bottom line. On the other hand, if you over price, this drives customers into the arms of your competitors. You still need to make money, but price doesn’t drive sales by itself. This is where sales strategies, marketing techniques, and all of these other components will work in tandem. As such, the price isn’t always the defining factor. But be warned, if you make the wrong decision and price the product wrong, your staff will work harder at selling it, meaning that you will feel the pinch in other areas of the business.
You have to sell your product for the right cost, but it’s a very difficult process to get to this point. Ultimately, in selling your product at the right cost, you are putting a value on your business. You should never undersell yourself, but you still need to find customers willing to try your product out, especially at the very outset of your business.
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