Several aspects must be taken into account when defining product prices. It largely depends on the success of your business. If your fees are low and do not leave you a profit margin, the future of your business is in danger. And the present. On the other hand, if your prices adjust to the market, you can have a much greater chance of success. It would help if you found a balance between supply and demand.
You should consider several strategies if you want to define the prices of your products. In this post, we will tell you.
The Three Strategies to Define Your Prices to Consider
Things can be very different when we talk about products or services. This post will focus only on pricing for products from an online store. For this, you need:
- Be clear about the prices of the products that your suppliers offer you
- Manage everything related to your costs and taxes well
Set the price according to your competition
They are the online stores that want to compete for price. They look at how much their competition charges for the same product and place a lower yield. This way, they try to penetrate the market through low or low prices.
What is the biggest problem with setting prices in this way? Well, mainly, you end up destroying your profit margin. You must sell many products to get the benefits you expect. If you fail to sell them, you are losing money.
And to sell that amount of products, you often don’t need just a low-price strategy. You also must invest in marketing and advertising, increasing your margin even further.
Set the price according to the margin you want to obtain
You have a product cost price and a series of expenses. And then there is all the margin you would like to get, which we could also call the added value. In this way, you calculate all the fixed and variable costs of selling a unit and add a percentage (20-30%), which would be the product’s final price for sale to the public.
Here, it would help if you considered not only the cost of acquiring the product. You must consider advertising, the cost of workers, the maintenance of your online store, your computers, etc.
This strategy’s most significant risk is solely focused on you and how much you want to earn. You are not thinking about how much the customer is willing to pay.
Therefore, it has its risks: your expenses may be too bulky, or the profit margin you want to earn may be too high. It would help if you justified it with a robust and reliable brand that generates a good impression on the customer.
Set the price according to the value you bring to your customers
Some products have a very high profit margin. And everything has to do with the perception of the customer’s worth of that product. Its cost price can be much lower. We can even deduct all the company’s expenses from the price of your products, and you would still have a high margin.
That is, your customers perceive you as expensive, but that does not mean a handicap so you can remain competitive, but quite the opposite. For products aimed at people with high purchasing power, without going any further, an expensive product is more interesting than a cheap one because it is perceived as of higher quality. And in addition, they are willing to pay for it.
It is not possible to do it quickly in all sectors. To sell according to the customer’s perceived value, you must have a very well-defined audience with high purchasing power, and based on that, you must build your brand. Your market is small, but you are willing to pay more, and you can also build a brand reputation of quality or high value if your service justifies it.
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