subject: Knowing If The Price of Your Product Is Right [print this page] Knowing If The Price of Your Product Is Right
Copyright (c) 2010 Luie De VonDeciding on the right price for the products and services you offer requires careful consideration. If you price your products too high, customers may not be able to afford it. But if you price to low, you might not get enough profit to keep the business alive. Thus, pricing involves analysis in order to be effective.Before you can set the right price for your products or services, there are three major things you need to take into account. These are your costs, your target market and your competitors.Costs include both the fixed and variable expenses you put on in order to come up with a product or service. These will be the materials and devices required for production, your cost of labor, building leases, marketing costs and other expenses you've spent. You need to set a price for each unit of product or service that you're selling that will enable you to recover your expenses.Aside from the costs, you need to consider your target market. How do your target customers perceive the value of your product? The perceived value of your products and services will strongly depend on the name of your company or the reputation of your business. This is where your marketing strategy comes in. Whether you're using online marketing or offline marketing or a combination of both, the reputation you build for your business will help you gain an advantage over your competitors.For instance, people are willing to pay a higher price for designer clothes simply because they perceive these products as high value or high quality because it bears a popular and well-respected brand name.On the other hand, other clothing companies cannot put such a high price on their products even if they offer the same quality because have not yet established a reputable status. If they choose to level with the high pricing of signature clothes, there's no doubt that they will lose because will unquestionably prefer the branded ones. Most people opt to buy unbranded clothes is because it is much cheaper.Another factor that can affect the perceived value of your products aside from a strong name is the packaging. If you observe in department stores or supermarkets, people still buy products that are priced slightly higher than other brands if they come in attractive packages. The reason behind this is because many consumers usually thinks that the quality or value of an item is associated on how it was packed. If you compare two items with the same value that are priced differently, most customers will still prefer better packaging than the other even if it comes at a higher price.Considering your target market also helps you to know whether there is a great demand for the products and services you offer or not. Of course, a greater demand gives you more flexibility in setting a price while a scarcity in demand may force you to lower your pricing.Last but not the least, you must also consider your competitors. If you have stronger competitors in the market, it may be necessary to introduce a pricing that is more affordable for your prospective customers. Because you are still starting your business while your competitors have already established a name, you must set your pricing in a range where it's more acceptable for your target market.Setting up a balance between these three factors is crucial in setting the right price. If you're new in the business or if you're introducing a new product or service, testing or trail pricing may be done. Start with a lower price then you can gradually increase your pricing until you reach the maximum acceptable price for your products or service. This does not mean that you'll be charging for the highest price. However, knowing the highest price that you can charge will enable you to gauge your standing in the market and help you set-up the right price.
