So of you might be thinking, now that I have this great product, how do I determine how to price it. That’s a question that almost every entrepreneur faces at one time or another. We struggle with how we can value ourselves and our product but also ensure it’s at a price point that works for your target audience. You are not alone. Pricing needs to be part of your overall product strategy which also impacts how you market your products. Here are a few tips to get your started.
As you think about price, think about what your competitors are doing? A great way to identify the right price point for your brand is to determine what your competitors are doing. Create a comparison list of your biggest competitors. Asses what they are offering and if you are offering a similar service, benefit or product, you have a starting point for your product. Remember not to overprice your item in comparison to your competitors. This may knock you out of consideration by your target audience if they can get your same product somewhere more cost effective. As you add more benefits and features to your product over time, you will have opportunities to revisit pricing. Stay competitive to ensure you get the right level of attention, especially for a new brand.
Ask your target audience how much they would pay for your product. They will give you some great direction to consider as the people who would consume your brand. Consider their other buying habits and brands they subscribe to. This will give you an idea of how much they typically would spend for the items that are most important to them.
Consider your geographic location where sales will be occurring and the cost of living associated with that geographic location. You want to be conscious of what the geographic market is pricing items for and be in line or competitive with those prices and rates. For example, the cost of living might be higher in California and New York for your product versus Alabama or Georgia and therefore, if those places are your target locations, you want to price within range of the average cost of living in that location.
Think about your average lifetime value of your product. You will want to consider what revenue you want to gain by selling this product. In this equation, you will also want to consider what it costs you to create, maintain and sustain your product and what it’s value you will be during the duration of its use. Products with a longer lifetime value and more opportunities for usage will typically cost more then products that are used less and may have a shorter lifetime duration.
As I alluded to before, ideally you want to cover your costs. Things like materials to produce, labor, packaging and shipping if applicable, marketing and more. Ultimately, the goal is to at least make back the cost of development with hopefully a little profit back for you.
Remember to think about your overall business strategy. Ask yourself questions like what is my expected profit margin and when have I forecasted to see that? Will I want to upsell or down sell at some point? How can I increase the value and benefits of my product for future growth? All of these will be important factors to consider before going to market with your product price.
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