While many strategies can assist you determine the proper price for your product or service(s), the key to achieving success is to use a mixture of strategies and tools, and most significantly , put the needs/priorities of your customers first. The more you recognize about your customer, the higher you’ll be ready to provide what they value, and therefore the more you’ll be ready to charge. So, here are some factors to think about when setting the proper price.
Know your Customer
Conducting some kind of marketing research is a method to understand your customer. It allows you to tap into their psychology, to know their interests and their lifestyles. you’ll conduct marketing research via mediums like informal surveys on your existing customer base that you simply send in emails, along side promotions to the more extensive and potentially expensive research projects undertaken by third party consulting firms.
You can either hire marketing research firms to try to to the work for you or identify your customers yourself or segment them into different groups – the budget-sensitive, the convenience-centered, and people for whom status makes a difference. Then find out which segment you’re targeting and price accordingly.
Know your Costs
An important factor to think about when pricing is to make sure that you simply cover all costs then think about a profit. this suggests that you simply need to know the value of your products. you furthermore may need to understand what proportion you would like to price the merchandise and the way many you would like to sell to show a profit.
Please note that the value of your product or service is quite the value of the item, it also includes overhead costs like rent, electricity, shipping of things from suppliers, stocking fees, and so on. you want to include these costs. Remember that the value of a product is quite the literal cost of the item, it is also in your estimate of the important cost of your product.
Many businesses make either of those two mistakes: They don’t include all their costs and underprice or include all their costs and expect to form a profit with one product and, therefore, overcharge. The rule of the thumb here is to form a spreadsheet of all of your monthly expenses such as:
Your actual production costs, including labor, marketing/advertising costs, and therefore the cost of sales of the products.
All operating expenses spent to have and operate the business.
All money borrowed (debt service costs).
The salary you pay yourself.
A return on the capital you and the other owners or shareholders have invested.
Capital for future expansion and replacement of fixed assets as they age.
List the quantity in Naira for every on your spreadsheet, the entire should offer you an honest idea of the gross revenues you’ll got to generate to make sure you cover all those costs.
Know your Revenue Target
If you don’t have a revenue target, you would like to ask yourself why you’re in business. you ought to have a revenue target or sales goal you’re aiming for. to realize this, take that revenue target, add altogether your operational costs highlighted above, and you’ll be ready to achieve a price per product or service you’ll charge.
However, if you’re selling one product, calculate the amount of units of that product or service you expect to sell over subsequent year. Then, divide your revenue target by the amount of units you plan to sell, and voila! You get the worth you would like to sell the merchandise to realize your revenue target.
If you’ve got different products or services, simply allocate your total revenue target by each product. Then do an equivalent calculation I highlighted above to urge the worth at which you would like to sell each product to realize your financial goals.
Know your Competition
Imagine going into the battlefield without knowing who you’re sparring against. Dumb, right? Believe it or not, the marketplace may be a battlefield and if you aren’t smart, you’ll get trampled upon even before you start to require baby steps. Therefore, make sure you do your due diligence by watching your competition. Your customers also will do an equivalent , after all. Ask yourself if the products offered are an equivalent as yours. If so, you’ll use their pricing as a guide for yours.
Then, look to ascertain whether there’s additional value in your product. for instance , does it provide a further service or is that the quality top-notch? If yes, you’ll increase your price. Remember to also think about regional differences and include your costs also .
Do you, for instance , offer additional service together with your product, or is your product of perceived higher quality? If so, you’ll be ready to support a better price. take care about regional differences and always consider your costs.
Keep Track of the Factors which will Impact Future Sales of your Products
While you aren’t a soothsayer, it’s also important that you simply keep track of things that might greatly impact the demand for your product within the future. These factors can range from something as simple as long-term weather patterns to economic/business laws or maybe competitors and their behaviors.