The goal of a product is to provide value that customers are willing to pay for. Setting the right price is about knowing exactly what customers gain from your product and what the benefits are worth to them. Product pricing is one of the most important decisions business leaders and product managers will make.
Pricing communicates to the market exactly what you think your value is. And it directly impacts how much revenue you are able to generate for the organization. If you set the price too high or too low — or choose the wrong pricing structure altogether — you may not find enough customers who will buy the product. Your business can fail to take off simply because it is priced incorrectly.
Companies commonly need to test different prices to see what will get the best response. As a product manager, the extent to which you own pricing decisions will vary from company to company. Typically you will play a supporting role alongside executive leadership, sales, and marketing. No matter how much you influence the final decision, it is important to know how to get pricing right.
Pricing your product or services can be a little tricky. There are several factors you need to take into consideration to ensure you’re making money, not losing it, including keeping your market in mind and considering future price changes.
Once again, Parvisor is here to help! We have put together a set of tips to help you determine the right price to charge for your product.
Cost of materials: The first thing to take into consideration when pricing your product or services is the cost you will incur. Be sure you cover the amount of money you put in — your costs form the base for your pricing.
Time and work involved: Also consider the amount of time and work it takes to make your product or provide your services. If you’re having something manufactured through another company, this cost should be included in calculating the base of your retail price.
If you’re making products yourself, decide how much your time and work should Be worth. Depending on the complexity of the product and how long it takes to make, your price will vary.
Competitors’ pricing: It’s always a good idea to see what competitors or similar businesses are charging for similar products. Research is always your friend! Check the prices of similar items and see how your pricing compares. This will provide you with an appropriate range for your pricing.
Profit: The next step is deciding how much profit you want to make. This is really at your discretion, but keep in mind that if your price is too high, it may push customers or clients away. You need to make money with your product or service offerings, while, if possible, leaving room for future supply cost increases. Once you decide on the profit you want, add it to your base cost.
Packaging: Packaging cost is something that sometimes slips through the cracks. If you’re offering a physical product that is wrapped or packaged, the costs of packaging need to be included in the retail price. Try to keep packaging costs low, so they don’t raise your retail price too high.
Determine the right selling price for your product to increase your profits. With this easy-to-use profit margin calculator, you can figure out your selling prices to save money and increase profits.
Once you’ve added all of these elements together, you should have something very close to your perfect price!
