Unsure of how to price your product?
There are so many things to consider when pricing your product it is easy to feel overwhelmed. You don’t want to overcharge and rip people off. But you don’t want to undercharge and lose out on profits.
Not knowing the right price to charge can cost you in the long run.
A company that rips people off will not be in business for a long time. But neither will the company that doesn’t charge enough to cover their costs and then some. By finding the right price to charge, your business will be able to thrive.
By following these 3 easy steps, you’ll be able to price your products with ease and confidence.
1. Know your market
Pricing a product can feel like a very fine line to walk. Since you don’t want to overprice or underprice it can be difficult to find what you believe is the right price.
So what can you do?
Research your competitors and see what they are charging. Assess your similarities and differences. Highlight what sets you and your product apart from your competitors.
This equips you to price based on comparative value. Or, if all else fails, just copy your competitors’ pricing.
Knowing the market allows you to maximize your profits while staying competitive with your price.
Once you know your market, it is time to figure out your costs.
2. Compute your costs
Not knowing your costs leaves you without a starting point for pricing.
In order to do more than just break even, you must know your costs and then add your desired markup to reach your profit goal.
Think about everything that goes into the process of your product. This can include material costs, labor, and overhead.
Now that you have that number, you know exactly how much it costs you to create one unit of product.
Because you want to make more money than it costs, it is time to think about your product markup.
3. Add the desired profit margin
Breaking even isn’t the goal of a business. You need to make more than just your costs back so that you can stay in business and provide excellent products or services to your customers.
Profits are necessary to help your company reach its goals. Those goals could be to expand, pay off debts, or save for a rainy day. Decide on the profit margin that will help you reach those goals, while still staying competitive with your price.
If you need some more help figuring out your profit margins, check out this great article from The Patriot.
Congratulations! You have just found what price to charge for your product.
Don’t let your pricing be the downfall of your business!
Not knowing the right price to charge can be a problem that hurts your business.
Once you know your market, know your costs, and know your desired profit margin you can price your products for success.
Having a price your customers can afford and you can make money on lets you stay in business.
Keep in mind an excellent product with a great price needs great marketing to help it sell! Enter your email below to download our StoryBrand Website Template.