Knowing how to set your product prices is a challenging issue that most business operators wrestle with. Too high and people won’t buy because they can get it cheaper elsewhere. Too low and people won’t buy because they perceive poor quality. How do you pick the right price to encourage sales?
Know your target markets
Understanding who will buy your products or services can help to determine where to position yourself in the marketplace.
- Where are they positioned geographically?
- How much value do they place on your products or services?
- What socioeconomic band are they in?
All of these questions can help you identify how much they might be prepared to spend.
Competitor research
How much are others selling your products or services for? Compare against similar geographic, socioeconomic and subcultural factors.
How much do you need to earn?
What’s your breakeven? What exactly does it cost you to produce your product or deliver your service? Take time to work it out because it will show exactly what the minimum price is at which you can sell. This will prevent you from making a loss at least from the outset.
How much do you want to earn?
If nobody else is doing what you do, and after you’ve worked out the minimum you need to charge to cover your costs, what mark-up do you want to earn? What profit would you be satisfied with? Is that realistic against the factors that make up your target market?
Hope these tips help you to position your products or services well so you make money from the outset of your new business.
© Gina Gray, Managing Director Clarity Press corporate communications and editor for How To Turn Your Hobby into a Business.
