For any small business, pricing their product can be a real challenge. This is especially true of technology products, because there are many factors that come into play here. If you price it very high or make it seem too premium it might intimidate potential customers.
However, if you price your product too low it might be difficult to generate adequate profits. Therefore, it is a fairly complicated process to decide on the right price for the products you specialize in. You must factor in the purchasing power of your audience, your own production costs, a profit margin and your overall marketing plan.
Here are the 5 ways in which you can figure out the best price for your product:
1. Determine your costs:
Account for your initial cost as well as the cost of getting your product to the customers – in case you need to set up a payment portal, shipping costs in case of a physical product, and so on. There also might be some fixed costs to factor in. Determine the total sum of all these.
2. Study the competition:
Delve deep into what your competitors’ pricing strategy is. Analyze and discover products in the same industry, competing for the attention of the same audience. Make sure you only look at products in the same category, similar to what you are selling, else the comparison becomes redundant.
3. Understand your audience:
Ensure that you have enough data and insights about your target audience, their location, demographics and purchasing power. It is half the battle won when you figure out exactly what the characteristics of your audience are, so as to make an informed decision about pricing.
4. Figure out your message: Your product pricing sends out a clear message to your intended consumers – if you price it higher than your competitors, the impression would be that you are offering a premium product.
However, if you price it lower, the message conveyed would be that you are focused on selling at a discount, and prefer volume when it comes to business.
It is better to arrive at a price that is slightly higher than the competition, while you figure out a solid marketing strategy for your product. This will also give you more of a margin for improving the customer experience and building on quality as you scale upward.
5. Test the waters:
The above will help you think and devise the ideal price – it will also be a good idea to test the market by starting off with a low price, keeping track of the effects and then raise the price and closely track the results from the change in price. This will enable you to decide what the ideal situation is and you can accordingly raise the price from then onwards.
Pricing for any product, be it in manufacturing or software, can be a tricky process. The key is to analyze all the factors that go into the costs of your product and the consumer mindset and then carefully and gradually uncover the ideal price.