Determining a price for your product or service is probably one of the hardest things you’ll do when setting up your business, and one of the most important. Price it too high and you risk losing potential customers, but price it too low and you could throw yourself into an outright pricing war in a penetrated market.
So we’ve put together a few tips to help you out.
Differentiate your product. Customers compare like with like when it comes to the best deals, so if you set yourself apart from your ‘competitors’ then you won’t actually be competing with them at all. For example, you could offer a year long guarantee which they don’t, or a customer loyalty program. You get the drift.
Identify your customer. If your demographic is made up of 18 year old college students, then you’re not going to sell many handbags at $200 each.
Start off high. I know it’s tempting to try to undercut your competitors, but remember that this can also devalue your product. It’s much easier to reduce pricing than to increase it. Identify your ideal price point and always start off a little higher than that, you can then bring it down over the initial few weeks if needed.
Develop a cost:price ratio. It’s crucial to accurately measure the costs that go into the manufacturing and marketing of your product in order to develop a cost: price ratio…and stick to it.
Pricing is a tricky process and the road to success can be rocky, but these tips will definitely help you get there!