Many entrepreneurs have difficulty pricing. They consider their expenses and then add a profit margin mark-up and then hope that customers will purchase at that price. If they don’t, entrepreneurs turn to discounts, a lot of which are either not noticed or cause an extremely expensive hobby than a lucrative business.
The best method to price your product in a market that is competitive isn’t simply adding up the costs and then making the possibility of a profit margin. It’s not about being the most affordable. Competing solely on price can lead to failure because once a better-respected competitor matches your price, the sales are likely to slow to a stop.
The reality is that the market isn’t concerned about the price you charge. What they are interested in is how much they value the services you provide in relation to what else is available that will help them solve problems or meet an objective of some kind. What they are interested in is the thing that’s “in the package” for them when they decide to purchase your product and why they’re better off purchasing it from your business instead of your competition.
When you are an entrepreneur, you are greatly concerned about the costs. To ensure that your business is sustainable, you must be financially viable. You and your client appreciate your services and products in a completely different way.
What is the best way to align the worth of your product to the market? With a simple five-step pricing method as follows:
1. Study competitive pricing.
The term “competitor” refers to whatever product or service your customers are currently considering or using to address their issue or fulfill their need regardless of whether that products or services are unlike your own. What are the costs of your top five competitors?
2. Determine where your product can be placed within the price range that is competitive.
Remember that the market you are selling to doesn’t focus on your expenses or the amount of time it took to create your product. What they are interested in is the value they place on it in comparison with other products they’re considering. Based on the benefits to customers and advantages that your product can bring to the marketplace (not the features or costs), how does your product placement in the price range?
3. Check through your figures (costs) to determine whether you could make money at this rate.
In addition to COG (Cost-of-Goods), you will also incur other expenses.
Determine the number of products you’ll need to market each month to become profitable and how much it will be (costs) to market this many products every month. Are these numbers feasible? What is the timeframe (marketing costs, expenses, etc.).) to achieve this volume of sales regularly? What is your burn rate till you get to profitability? Take into consideration the differences between the actual cash income that is realized every month and invoiced sales that won’t appear in your bank account until a few days or weeks later.
4. Are your prices in line with the pricing range that is competitive?
If you are able to make a profit at this price, then you’re probably priced right. If not, you need to determine what benefits you possess (or might create) to justify the increase in price and an increase in the worth of products by market. Find ways to cut down on your expenses. Make use of channels as well as visibility partners to increase your sales quantity.
5. Are you earning profit at a wholesale price?
If you’re selling your product via distribution and sales channels, ensure you’re profitable when it comes to wholesale and distributor pricing.
If you set your prices according to how the customers value what you have to offer, it increases the value of your brand as well as your relationship with the people you serve.