Coming up with a pricing strategy can be difficult. You must consider your production costs, shipping and handling, marketing, and other expenses. You also need to make sure you are making a profit.
Most businesses set their sights on the competition to find out how they can lure customers. You can charge a higher price if your product is of better quality. If it’s not as good, you’ll need to be more competitive with your pricing.
Peter DeCaprio says you also have to decide if you want to charge a flat rate or offer discounts for bulk purchases. Some businesses choose to offer free shipping or discounts for loyalty programs. Others prefer to keep their shipping and handling fees separate from the product cost.
Let’s set aside the technical decisions to be made later and focus on how you can attract customers with your product’s price.
Setting the Right Price
Know Your Market
The first step is to understand your target market. You need to find the average price people are willing to pay for similar products.
You can use online tools like Google AdWords and Amazon’s Sponsored Products to get the numbers.
Set Your Pricing Strategy
Once you know the average price, you can start to set your pricing strategy.
- To be a premium brand, you’ll need to charge more than the competition. Make sure your product is high quality and worth the price.
- To be a budget-friendly option, you’ll need to offer a lower price but ensure the quality is not compromised.
- Peter DeCaprio recommends using discounts and promotions to attract customers. Just make sure you don’t end up losing money on the deal.
Be Flexible With Your Price
Remember that your price is not set in stone. You can always adjust it based on customer feedback, sales data, and other factors.
Don’t be afraid to experiment with your pricing. You might be surprised at the heights people are willing to go to get your product, which means paying a high price.
Use ‘Free’ Smartly
Most people love freebies. You can use this to your advantage by offering a free product with a purchase or a free shipping deal. Peter DeCaprio recommends using ‘free’ as a way to upsell customers. For example, you can offer a free trial of your premium product with the option to upgrade later.
Most businesses offer a freemium because they want to attract customers. So, make sure the quality remains consistent.
Markup Percentage Carefully
Your markup percentage is the difference between your product’s cost and the selling price.
For example, if your product costs $10 to make and you sell it for $15, your markup percentage is 50%.
You’ll need to calculate this carefully because a too-high markup will discourage customers from buying, and a too-low markup will result in a loss. To find the right percentage, start with a lower number and increase it until you reach the sweet spot.
Pricing your product can be a tricky process. But Peter DeCaprio believes if you take the time to understand your market and set a strategic price, you will be able to beat your competition. Product price and quality, and loyalty go hand in hand. So, don’t forget to focus on all three when making your decision.