Last modified:Thursday 31 October 2019
Consider the following elements when setting your price
Determine the value or your product/service for the customer
The more unique or rare your product or service is, the higher the price the consumer will be prepared to pay for it. Some products are less sensitive to price than others. As an example, this applies to very high quality products given that there are very few alternatives. In addition, consumers will be a lot less attentive to the price of a product when the latter is well marketed and available in abundance.
Before offering a product, you should evaluate the "value" relative to your target group. The latter is not equivalent to the purchase price of your product! What prices will customers be willing to pay for your product/service? Have a conversation with buyers and ask them about the benefits, ease of use, accessibility, etc.
Analyse your competitors' prices and determine your margin
Competitors also determine your pricing policy certainly when it comes to comparable or practically identical products. In this case, the consumer will be more sensitive to the price, precisely due to the easy comparison offered. The price set is not just determined by the product itself: the quality, design, safety, ease of use, delivery speed, technical assistance, credibility, and potential time saving involved will also be elements for which your customers will be prepared to pay a supplement.
What is the competition offering in this area, and at what price? Try to define the minimum and maximum margin for your product/service. Consider the specific characteristics of your product or service so that you can give it a unique position in the market. This is the only way you will be able to avoid getting into a sales war where only the price matters.
Don't forget your production costs
Selling at a loss is forbidden and earns you nothing. You should at least meet the profitability limit, which is to say the limit where the revenue and costs are at least balanced. This limit corresponds to the setting of the minimum price: you make no profit or loss. Make sure that all costs associated with a product or a service, such as material costs, production costs, payroll, transport costs, administration costs, accounting costs, sales costs, etc. are considered when setting this limit.
Don't lose sight of your commercial objectives
In some cases, profit margins are dependent on commercial objectives: the objective is to improve the reputation of a product, its market share, or even to reduce that of the competition. To achieve these objectives, companies make pricing concessions and apply different strategies.