The Price is Right: How to Nail your Product Pricing

Figuring out what you should sell your products for can be a bit tricky, especially in the early stages of your business where you don’t know what your customer expectations are yet. This guide will show you how to start pricing your products so that customers will want to make purchases from your store!

Know your Market

It’s rare that you’re selling a product or service that doesn’t have a comparable alternative that customers could buy. This is a great place to start, as you’ll be able to see what your potential competitors are currently charging – and thus, what customers are generally willing to pay. This should only be a baseline; your product will probably be different from what’s already out there – so the differences that exist will affect what you can charge. For example, if you use a more premium material, or guarantee a longer warranty than existing options, you can charge more. If your item is made with more affordable materials, you can charge less than competing businesses.

Know your Customers

Similarly to knowing the market that you’re selling in, it’s important to also focus on the people you intend to have as customers. What do your customers want most of all? Are they looking for luxury or bespoke goods? Do they want rapid shipping, or reliable customer service? These options will all affect who shops at your business – and accordingly, what they’ll be willing to pay. Ultimately, you should be thinking of your customers, and what their specific needs are.

Advertising

Premium Brands are able to charge more for their products, because they have spent years establishing their brand as a reliable, sought-after product. This branding takes time, and costs money – you too will be able to accelerate people’s awareness of your brand, but the costs can be substantial. If you’re spending a lot of money on advertising, then you should expect to be able to charge a greater amount for your products.

This works in the other way, as well. If you’re just starting out, and your products aren’t as well known by consumers, then you won’t be able to command the high prices or profit margins that well-established brands can. The reason for this is that as a relatively unknown business, customers can feel as though they’re taking a risk by buying the products. Make it easier for them to ‘roll the dice’ by lowering the prices on your products until you have a larger base of customers who love your products, leave reviews, and recommend your business to their friends. While your profit margins will be lower at first, see this as an investment back into your business! As you build greater volume in the future, you’ll be able to incrementally raise prices to grow your profitability.

Spend the time to work out which prices work the best for your products – for any business, there is a ‘Goldilocks Zone’ that maximises profitability, between charging too much, or too little. The aim is to price within this zone as often as possible, so that with each sale, you’re growing your business.