Setting the right prices for your products is a balancing act. A low price isn’t always ideal, as the product might see a healthy stream of sales, turning no profit. Similarly, when a product has a high price, a retailer may see fewer sales and prices for more budget-conscious customers, losing market share. One secret to business success is pricing your products properly.

Price your products correctly and that can change how much you sell, creating the grounds for a business that will prosper. Get your pricing wrong and you create problems that your business may never beat.

Price Your Products The Right Way

There are different pricing methods in business, However, there’s no one approach that suits many products, businesses, or markets. Pricing your product usually involves considering certain factors, including deciding your target customer, tracking how much the competitors are charging, and understanding the relationship between quality and price.

The good news is you have a great deal of flexibility in how you set your prices. That’s also the bad news. The first step is to get clear about what you want to achieve with your pricing, You want to make money. That’s why you own a business. Making money means generating enough revenue from selling your products so you can not only cover your costs but take a profit and perhaps expand your business.

Underpricing. Pricing your products for too low a cost can have a disastrous impact on your bottom line, even though business owners often believe this is what they should do. You also need to be very careful that they are fully covering their costs when pricing products.

Overpricing. On the flip side, overpricing a product can be just as detrimental since the buyer is always going to be looking at your competitors’ pricing

How To Determine The Best Price

We should view pricing as a practical process with the ultimate aim of keeping your business afloat. In the marketing mix, pricing is the only thing that brings revenue and it is vitally important that you become familiar with the ways you can use it to your advantage.

Add up your costs (per product)

Foremost, you need to understand all the costs involved in getting each product out the door. If you order your products, you’ll have a straightforward answer on how much each unit costs you, which is your cost. If you make your products, you must dig deeper and look at materials. How many do they cost, and how many products can you create from it? That will give you an estimate of your per item.

Add a profit margin

Once you’ve got a total number for your variable costs per product sold, it’s time to build profit into your price. Let’s say you want to earn a 10% profit margin on your products on top of your costs.

Don’t forget about fixed costs

It’s important to remember that variable costs aren’t your only costs. Fixed costs are the expenses you’d pay no matter what, and that stays the same whether you sell 1 or 100 products. They’re an important part of running your business, and the goal is that they’re covered by your sales.

Test and adjust

Don’t let the fear of choosing the wrong price hold you back from starting your store. Pricing is always going to change with your business, and as long as your price covers your expenses and provides some profit, you can test and adjust as you go. Run to see how your strategies add up. Taking this approach will give you a price you can feel confident about because the most important thing for pricing is that your pricing helps you build a sustainable business. Once you have that, you can launch your store or your new product, and use the feedback and data you get from customers to adjust your strategy.

Here are some other practices to help you price right:

• Listen to your customers. Try to do this regularly by getting feedback from customers about your pricing. Let them know you care about what they think.
• Monitor your competitors. If you don’t have deep pockets and can’t afford to hire a market research team, hire some college students to go out regularly and monitor what your competitors are doing.
• Have a budget action plan in place. Try to have a plan for your pricing that extends out three to six months.

There are many methods available to determine the best price, but successful businesses use a combination of tools and know that the key factor to consider is always your customer first. The more you know about your customer, the better you’ll be able to provide what they value, and the more you’ll be able to charge.