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But pricing can be quite tricky. There are often a lot of factors to consider, and multiple steps to take before arriving at a price that reflects the true worth of your product or service. This article presents you with five things you can do to fix the right price for your offerings.
Determine Your Costs
One of the first things you should consider when trying to arrive at a price for your product is the cost incurred in producing or acquiring it. The total cost of the product will include the cost of raw materials used to manufacture it, worker wages, selling and distribution costs, and overhead costs. As a business, you’ll want to earn a profit on each item you sell. So you’ll need to add a markup to the total unit cost, to achieve that. One approach to determining markup is keystone pricing. Here, you simply double the total cost of a good to obtain its market price. Alternatively, you could add a markup that seems fair to you, based on customer preferences, competitor’s prices, or your own aims. Adding a markup to the total cost to determine your price is called cost-plus pricing.Study The Market
We referred to market conditions in the previous point—for a good reason. It’s important to look at the prevailing market prices for the type of product you’re selling before deciding your prices. Customers are probably already used to buying at current prices. You’ll often need to set your price close to the average of what your type of good goes for at the market. Study your competitors. Know what prices they’re setting for their goods, and, if possible, why they’ve fixed them. These facts should help you know what your potential customers will consider a fair price. There’s more on this below.Know-How Much Your Customers Want To Pay
Customers have different reasons for preferring certain prices. And it’s not always about what the cheapest option is. Here, you’ll be aiming to arrive at a value-based price that reflects your client’s wishes.Find our comprehensive listings of businesses in Nigeria here https://businesses.connectnigeria.com/
Some customers are most concerned about the convenience with which they can purchase a product. As such, they’re willing to buy it if it’s quickly available to them, even if it’s a bit more expensive than other less convenient options. Other buyers may go for the best quality product on the market, even if it’s among the highest priced of its kind. Then there are status-conscious customers who go for something because possessing it is a sign of affluence. If you’re going to decide a price for your product or service, you’ll have to know which of these categories your typical customer belongs to. This will help you come up with something that they’ll consider a decent offer.
Decide What Your Pricing Should Achieve
You should have a purpose for settling for a given price. For instance, you may launch a new product with a lower price than the market average, just to undercut your competition and gain a share of the market. But if your customers are more concerned about quality or ostentation, you could set your price higher to convince them that you’re providing them with a high-quality item. Let’s say you want to boost your sales within a relatively short period. You could employ psychological pricing techniques that appeal to their subconscious perceptions. There’s more about this in our article, Sell More with Psychological Pricing.Adjust Your Prices Over Time
Be prepared to adjust your prices over time to reflect changes in the factors that determine it. For example, if the cost of raw materials used to make your product falls substantially, you may reduce the price of that product (if other factors remain constant). Customer preferences evolve, and competitors may tweak their pricing. These sorts of events will have an impact on how your goods and services and their prices are perceived by the market. Stay on top of these situations by monitoring current trends. Doing this will enable you to determine what kind of price adjustments you should make.Final Words
The prices you fix for your products and services could be pivotal to the growth of your business. Take care to examine all the factors that affect them, so you’ll arrive at a price tag that’s right for your goods. Featured Image Source: Engage Selling SolutionsGot a suggestion? Contact us: editor@connectnigeria.com
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