The Dos and Don’ts of Product Pricing

Entrepreneurs tread a tightrope when it comes to product pricing. Set a too-high price and you risk losing customers to your rivals. Set a too-low one, and you fail to get good returns on your investment.

Whether a business offers top-selling products on Amazon or provides services to a local community, it must aim to land an optimum price for every product or service they’re selling. An optimum price is an amount that is attractive to customers but still covers the cost of production, procurement, and delivery of the product or service.

There’s no single formula when it comes to coming up with the best rates for your products or services. What works for one business may not be practical to others. 

What you can do, however, is evaluate your product or services by keeping in line with these dos and don’ts of product pricing:

Dos

• Do market research – How much are your customers willing to pay? How much do other companies in your niche charge? These are the main questions that should be answered by your market research. Answering these queries will help you decide whether to beat or match the price of your competition.
• Outline and calculate your expenses – To profit from your business, you must ensure that all your expenditures are covered. To do this, you must meticulously run through and calculate your expenses – from direct costs such as product development and manufacturing to variable ones like packaging and materials.
• Go for value-based costing – Pricing your products based on its market value depends on knowing how much customers are willing to go for your brand instead of your competitors. You must weigh your advantages and disadvantages over your close rivals to determine your product price based on value.
• Update as needed – Rates should be updated when the occasion calls for it. Customer preferences change, your costs fluctuate, and competitor prices may be modified, so it’s crucial to stay on your toes and update your pricing accordingly.

Don’ts

• Don’t think offering the lowest price guarantees the highest profits – Being the brand with the lowest service costs may not always be the best move. For one thing, you have expenses to cover; and for another, this may raise suspicions as to the quality of your product or service.
• Don’t hesitate to look for better suppliers – Just because you’ve worked with your current suppliers or service providers for a long time doesn’t mean you should settle. Hiring an in-house assistant may be conventional but outsourcing to a virtual staff can be more beneficial to your company as far as creativity and economy is concerned.
• Don’t forget to consult your business plan – Always go back to your goals for starting a business as well as your long-term objectives. How will your current pricing help you to achieve your goals? Will your service rates be enough to support expansion?

Matching your services with the right cost can be tricky. Achieve the optimum amount that covers your expenses and creates substantial profits by working with these dos and don’ts of product pricing.