How To Price Your Products
How To Price Your Products
How To Price Your Products
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How Anne Wojcicki Developed a Strategic a business that will prosper. Get your pricing strategy wrong and Privacy - Terms
The following pages will detail how to meet your business goals
The first step is to get real clear about what you want to achieve
with your pricing strategy: You want to make money. That's why
cover your costs, but take a profit and perhaps expand your
business.
price alone drives sales. Your ability to sell is what drives sales
and that means hiring the right sales people and adopting the
right sales strategy. "The first thing you have to understand is the
Rolex and a $40 Seiko watch? The Seiko is a better time piece. It's
far more accurate"¦. The difference is your ability to sell."
poor pricing decisions. There are two main pitfalls you can
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of people who work for them, the lease, etc. and this is
:
what price it takes to do all that," he says. "Put yourself
you want out of your business when pricing your products. Aside
from maximizing profits, it may be important for you to
maximize market share with your product -- that may help you
You may also want your product to be known for its quality,
rather than just being the cheapest on the market. If so, you may
want to price your product higher to reflect the quality. During a
tools and know that the key factor to consider is always your
customer first. The more you know about your customer, the
better you'll be able to provide what they value and the more
you'll be able to charge."
:
Know Your Customer
are price sensitive, etc.. If you don't have a few thousand dollars
to spend on market research, you might just look at consumers
price accordingly.
how much your product costs. You also have to understand how
much you need to mark up the product and how many you need
to sell to turn a profit. Remember that the cost of a product is
more than the literal cost of the item; it also includes overhead
costs. Overhead costs may include fixed costs like rent and
variable costs like shipping or stocking fees. You must include
List the dollar amount for each on your spreadsheet. The total
should give you a good idea of the gross revenues you will need
to generate to ensure you cover all those costs.
and you can come up with a price per product that you want to
charge. If you only have one product, this is a simple process.
Estimate the number of units of that product you expect to sell
over the next year. Then divide your revenue target by the
number of units you expect to sell and you have the price at
One size does not fit all. You can only go so far pricing all your
That opens the door to raising and/or lowering prices for your
products. In order to make this call one way or the other, you
should first understand what's already working. Analyze the
profitability of your existing products, so you can do more of
what works and stop doing what doesn't work. You want to find
You should always be testing new prices, new offers, and new
combinations of benefits and premiums to help you sell more of
your product at a better price. Test new offers each month. Raise
the price and offer a new and unique bonus or special service for
the customer. Measure the increase or decrease in the volume of
the product you sell and the total gross profit dollars you
:
generate.
sales (if accounts receivables are used) for the weeks following. If
a price increase is too high, customers will react pretty quickly.
Also watching the competition can help - if you've made a
positive change in prices; competitors are likely to follow suit."
But there is a right way and a wrong way to raise prices. You
don't want to alienate your existing customer base by raising
prices too steeply, especially during a recession. "Rather than
have a sudden increase, have a strategic plan over two to five
years during which you gradually increase your price 5 to 10
You can make Wednesday senior citizen day when seniors get a
20 percent discount. Then maybe you can offer a student
discount day. Then all you're doing is keeping the price the same,
but to those people you're giving them a cut but it's not like
you've lowered all prices."
less for the same price which will effectively reduce your costs
without appearing to reduce the value to the customer," she says.
"Restaurants have found this particularly helpful in terms of
portion sizes but this same strategy can be applied to service
industries as well."
Related Links:
Case Study: Finding the Right Price for a Hot Product
Setting prices has always been more art than science. New
software aims to change that.
Recommended Resources:
The Art of Pricing: How to Find Hidden Profits to Grow Your Business
By Rafi Mohammed
www.rafimo.com
The author has a very interesting point about how to get out of
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information to help you choose the one that's right for you, use the questionnaire
below to have our partner, BuyerZone, provide you with information for free:
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