Proper product pricing is one of the keys to business success. Learn how to price your products right in this article.
Are you stuck and cannot launch your latest offerings because you don’t know how to price your products right? If your answer is yes, you’re not alone. Many businesses often see pricing as a bottleneck in their product launch.
The good news is that you can take steps to correctly price your products, which in this case, are your fashion items for sale. In this article, you’ll learn some important considerations to get the price right, and helpful tips to get you started.
4 Important Considerations in Product Pricing
The first essential step in product pricing is to know the key factors you need to consider. Here are some primary considerations to prevent you from getting lost in the process:
As in any key business decision, you must consider your customers first. The more you know about them, the better you can provide them value and charge them right.
Doing market research is essential to know who your customers are. You can conduct informal surveys or partner with consulting firms to explore your potential customers and segment them granularly.
Understand your market based on their demographics, purchases, and price considerations. Are they price-sensitive or convenience-centered? Do they have budget constraints? Once you have segmented your market, it’s easier to know your target audience and the price range suited for them.
Keep in mind that you need to factor in a profit. This means that you need to consider all the expenses you spent. Doing so will help you identify how much you should mark up and how many items you need to sell to generate a profit.
Remember that the product cost doesn’t only refer to the literal price of the item. You should also include overhead costs like rent, shipping fees, and labor.
Get their total amount to get the real cost of your product. And then, determine how much you need to make on it. For example, if you want to earn 10%, you have to factor that into your costs and price your products according to that.
It’s also beneficial to look at your competition. After all, your customers are also likely to look at them before making a purchasing decision. If the products you’re offering are comparable, gauge their pricing.
Then, make a list of additional value customers can find in your product. For example, do you offer free shipping, or are your items of better quality? If so, you can put a higher price tag. Don’t forget to consider regional differences and your costs as mentioned above.
We’ve learned during the pandemic that nobody can predict the future. While that’s the case, you can monitor external factors that may affect the demand for your product.
For instance, you can consider long-term weather patterns and regulations within your country that may impact your future sales. You’d also like to consider the possible actions your competitors can take when you introduce a new product like a price war.
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How to Price Your Products: A Step-by-Step Guide
1. Know what your market is willing to pay
As mentioned earlier, your customers should be your primary consideration. If you’ve already identified your target market, determine how much they’re willing to pay for your product.
By determining your customers’ willingness to pay, you can set your prices at an optimum level, allowing you to maximize your profit and client satisfaction. You can determine this by conducting a survey on your target market.
2. Factor in all your costs
You want to be certain that your final price covers both your direct and indirect costs. Direct costs are variable expenses like raw materials, packaging, and distribution.
Indirect costs are expenses that are often fixed like employee salaries, rent, and business rates. You must factor in all these costs into your final pricing and mark up based on your desired profit.
3. Consider how much your competitors charge
Next, find out how much your competitors charge. This will allow you to better understand the range of products and prices and where your business fits in.
Remember, though, that matching or beating your competitors’ prices won’t always do the trick. Your final pricing can send a “signal” to your customers.
Some customers assume that low price means low quality. If you’re offering high quality products, pricing low may put your potential profit at risk.
4. Think about other factors
You’d also want to consider other factors like VAT on your final pricing. Also, you might need to offer different prices for different locations, markets, or platforms.
Can you allow installment terms or late payments? Keep these other vital things in mind and also monitor your cash flow.
5. Keep an eye out for market changes
We’re living in a constantly evolving world. Given that, prices cannot be fixed for so long, and it’s crucial to know how to price your products right.
Your expenses, competitors, and customers can change without warning. You’ll have to make the necessary adjustments to keep up with the changing market.
As a tip, always monitor what’s going on and try your best to engage with your customers regularly to ensure your prices remain optimal.
Level up your eCommerce game
Launching and pricing your products correctly can be a daunting task. If you’re still confused about how to price your products, you can use this practical guide.
You have to consider all the crucial factors like your customers, competitors, market, and costs as a rule of thumb. And utilize the appropriate channels to drive more potential customers to your business.
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