Setting the price of your product when you first start your business or enter a new market can be one of the most critical decisions you’ll have to make. Your customers will not purchase your item if you ask them to pay too much, and if the cost of your product is too low, the customers will believe your item or service is substandard.
Considering each factor while pricing your products can be a tricky task, and not setting an optimum product price can lead to low sales and profit. However, focusing on the six steps listed below will make it easier for you to set optimum product prices and drive maximum sales.
Why Must We Focus on Setting Optimum Product Prices?
Having accurate product prices is more crucial than just expanding your profit margins. It’s also a marketing strategy that may help your company increase revenue. When we talk about pricing, we should think above our business’s operational costs and bills. As a seller, you must select the right price to convince your target customers to purchase your product. Plus, your customers should get the idea that the quality of your product is not compromised. That way, you will be able to achieve three main things; sales, profit, and customer satisfaction!
SIX STEP APPROACH FOR DETERMINING THE BEST PRICE FOR YOUR PRODUCT
1. Learn and Get Familiar With the Market
Do your homework and spend time researching the market you want to sell in. When it comes to selling on an e-commerce marketplace like Amazon, it is considerably more essential to figure out the price your customers are willing to pay. As there are thousands of other sellers offering similar products like yours, your customers can easily ignore your product and go to another seller if they are not satisfied with your product price.
Remember that it’s essential to know about the perceived value of your product among the customers. Any smart purchaser would not pay more than the value he/she sees in the product, especially when they can buy a similar product from a different brand. Determine the maximum price you can demand according to the marketplace and customers.
2. Look into Your Competitor’s Prices.
Ignoring your competitor’s prices is like digging a hole for yourself. You might set your product prices too high, and your competitors will end up getting maximum sales. Make sure to know how much your competitors are charging. You can charge a little more than your competitors if you think your product is different from theirs or you have more to offer. Otherwise, keep your product prices competitive to stay ahead of your rivals.
You might have difficulty keeping your prices competitive, especially when you are selling on Amazon, where price changes occur too often. Get help if you can’t manage to keep optimum product prices on Amazon! Sign up with the best repricing tool in the market and let the software handle your product prices. Check out our blog to learn how the best repricer can help you keep competitive prices on Amazon!
3. Keep Your Operational Costs in Mind
A fundamental concept of pricing is that you must calculate all of your costs before adding a profit margin to them. Make sure you know about your operational expenses to calculate the initial cost of your product. Knowing your product’s cost helps determine how many units you need to sell to reach your break-even point and start making a profit. Pay attention to the data instead of setting your product price randomly. Analyze the market, calculate the fixed and variable costs, and then make a calculated decision!
4. Establish Your Profit Goal!
You should also know how much profit you expect to generate from your product. Come up with a product price after factoring in your expenses of manufacturing, promoting, and selling the product. It will help if you have a clear profit margin that you want to set for a particular product. Calculate the no. of units you must sell to achieve your profit goal. If you think you can sell these many product units, great! However, if you fail to get desired no. of sales, in the beginning, consider adjusting your product price to retain your position.
5. Set Your Price After Considering All the Points!
This is the most crucial step to take. You must be accurate and set an amount for your product after considering all the factors mentioned above. Take your time and come up with the numbers your customers will find attractive. Choosing the wrong product price might have a massive impact on your sales, and you don’t want that.
6. Keep an Eye on Your Product Prices.
Another important aspect of correctly pricing your items is to check the prices and profit you earned on a regular basis. You must concentrate on the profitability and the sales you are making. After introducing your product in the market, if you think you are going slow, consider calculating your product prices again and come up with attractive numbers.
Tip: Pricing is not always the only factor you need to focus on. If you want to grow your business, make sure you invest in marketing your products too! It drives attention from the audience and helps you get more sales than usual.
Setting an optimum price for your product is not as easy as it sounds. You have to consider different aspects before setting the best price, and even after that, you need to keep adjusting your product prices to stay ahead of your competition. However, getting the best repricer for your business might offload you from the pressure of keeping your product prices competitive. Sign up for our 14-day free trial and let us help you get maximum sales on Amazon!