Finding the appropriate price point for your product or service can prove to be taxing at times. The pricing should benefit both the customers and your company. The price should not be too low, as it can affect the credibility of your product or service. On the other hand, the product should not be priced too high, as it can reduce the consumer demand for your product. Select a perfect balance between the two to obtain the desired result.
Consider the Consumer
Decide the pricing on the nature of the product. For instance, consumers will readily prefer a low priced gas station to save some money. Consumers will also be thrilled if McDonalds initiates a new low priced burger. However, the same reaction will not be witnessed if you offer a vehicle for a meager amount of $1,000.
Select the pricing by considering the involvement of the consumer in the buying-decision process. If you have your own home-business set up and sell via the Internet, then it is recommended that you include all the shipping and Internet domain charges as well. Include all the investment factors in order to earn a decent profit.
Competition and Production Costs
Do not commit the mistake of pricing your products on the basis of your competitor's pricing strategy. The competitor might be investing less on the manufacturing aspect, and this might be the reason for the low pricing strategy. Incorporate all the costs that go into the actual production while deciding the price of the product.
Decide What to Charge for
The quality of the product and the demand plays a vital role in the pricing of a product. You will certainly not expect your customers to buy a poor quality product for a higher price. The consumers should feel that they are paying the right price and obtaining the best service or quality in return. The same logic applies to the consumer demand as well.
If the demand for the product is less, then there is no point in increasing the price of the product. Gauge the consumer demand and select the price accordingly. Introduce the product for a lower price, and gradually increase the price on the basis of the consumer demand. If you make good profit, increase the price. If you suffer a loss, reduce the price to the original. With a gradual increase in consumer demand, you can also offer services such as discounts to your customers. This will propel the demand for your product.
Consider the Current Market
Conduct a thorough research of the market environment. Understand
the competition level and the major players in your product category.
The current recessionary situation should also be taken into account
while deciding the price.
Profit is the ultimate goal of any business. Your home business set up cannot succeed if you do not have a handsome profit margin. Do not price your products at a minimal price, as it will prevent you from covering the advertising, distribution and labor charges.