Pricing is all about striking a balance as both overpricing and underpricing will affect your bottom line. Your product, target market, production cost, target revenue, and competitors affect your pricing. We had previously talked about how to price your products using the Cost-Plus Pricing Strategy. It’s one of the most straightforward pricing methods based on your desired profits.
However, number-crunching is the easiest part of price determination. One thing for sure, you need to do thorough market research to find out how much your target customer is willing to pay. You can choose to take competitor prices to gauge the prices, go on social media to run a poll/survey, have a third-party do the market research for you.
Here are some key considerations to help you price your products.
You can only make the right pricing decisions using current market trends. The economy is ever-evolving and you need to keep track of everything happening in your niche to appeal to your target market. Check on industry news, market trends, new and improved product emergence, regulations, etc. All these factors will determine if you need a price tweak.
In addition to monitoring the market trends, monitor all your products individually to see if they’re profitable. Get regular feedback on pricing from your customers. Send an email survey or poll to get feedback. The bonus, your customers will see that your care boosts your reputation. You should also eye-ball your competitors once so often to check any significant price changes and investigate them.
Should you raise your price or is it a risky move?
Here is the thing, never be afraid of testing new prices and offers that could help you increase your profits. If the market demands an increase to prices, test the uptake and slow down production orders. The reaction is often noted pretty fast. In good economic times, a price increase is often accepted.
If it doesn’t work, don’t panic. Just get back on the grind and try something new. Continually test and monitor prices so as to remain competitive in your niche.
PS: Don’t increase your price by a giant leap all at once. Do small increments gradually so as not to alienate your customers.
Bundling pricing is where multiple and related products are sold as a bundle. You can get 5 pairs of socks, 3 t-shirts, makeup kit and brushes, or a set of shampoo and conditioner. According to Harvard Business School, related product bundles sell better as they have a higher perceived value in comparison to a single product.
Customers feel they’re getting value for their money and it’s harder for them to compare prices for such offers.
The price you start with is not set on stone. You’ll need to pay close attention to your customers buying behavior, market trends and competitors to be on top of your pricing game. Also, regularly re-evaluate your business expenses too. You may find that some suppliers change prices regularly and you need to have more wiggle room to cater for that.