The biggest challenge a company and especially startup faces is pricing the products.
When you are trying to bring something new to the market it acts as a major hurdle!
The only option in front sometimes owing to various factors might be to benchmark the product with others of the same kind in the marketAs the idea itself sounds. it can be a roadway to chaos
So the topmost priority of any business owner should be to get the right element from the start.
When it comes to ‘Price your startup’s product’ then it is a tempting task.
Things To Steer Clear Off While Pricing Your Products
Be very away from setting a price of a product to a minimum. It can be tempting but for a growing business, it is a terrible idea. Reasons are simple:
Your total return on investment will be extremely low that will not help you to afloat your business. You need to keep in mind that the price must be limited to the total value of the raw material to the least. After all, you need to continue the business in future too. If the total price earn is not equivalent to the total invested then you are back to square one.
When the economy is going good, it will be a struggle to increase the price of a product. It can be an intimidating task to convince a customer to a single penny extra when they were paying less. It is highly possible that you will lose a customer on the way.
A premium products will always require a high price, even a customer is aware of it. For instance, you can check the labels of wine from a prestigious company which will differ from discount brands, even though there is not much difference as per blind test. The thing is that with low prices customer feel that there is a big reason for a low price and they will compare quality with the expense.
Well, this is the key reason that it is essential to price your startup’s product appropriately.
Factors To Keep In Mind While Pricing Your Products
There are a few factors that can come handy while deciding on the best pricing of any product.
Total Cost Of The Product
There is three main cost that you need to keep at the top of your list while coming up with the price.
The cost that you invested in the raw material that was used for the creation of your product. This will include the cost of licensing, stock photography, digital products, etc.
The total rate that you paid to your labour for the manufacturing of the specific product. It will include the living wage of that you provide to the labour on an hourly basis for the manufacturing of each piece.
The total extra cost that was used for performing operations of the product including rental, web hosting, electricity, and even the total expenses of the furniture. Don’t forget you are a startup company and hence everything is new in the firm.
Once you get every cost don then you can use this formula that can help you to come up with the best result.
Base Cost = Labour Cost + Materials Cost
Wholesale Cost = Wholesale Markup * (Labour Cost + Materials Cost)
Retail Cost = Retail Markup* Wholesale Cost
Profit = (Items Sold * Retail Markup) – Overhead Cost
Another factor that will come handy is the status of the market. This will include your target market, audience and even competition.
Do your homework properly while searching for what your competitor is charging for a similar product.
There are so many ways to follow it,such as online price checking or even asking for a quote.
Then, move to the next point that will include the pay later buy now, offers, discounts, etc.
You need to understand their strategy of your competitor to get an idea whether the offers are for the season for just to attract the customer.
What does your target customer think about the best possible price for a product? Are customer attracted to low prices or to which extent?
Are they valuing higher prices? These are just an idea for you to lookout for.
When you are trying to enter a market then make sure that you understand it like the back of your hand.
The companies regularly forget the most important concept while setting up the price for their product – positioning.
It is a secret weapon that can be extremely productive and can come handy when dealing with competitors.
Pricing will help you to position it in the market such as mid-market, premium or low-cost alternatives. This is the things that were mentioned above as well.
A company can choose the price that is way too below the market is set in order to grow and share gain.
Or they can come up with a market price that will fall equally with other companies.
The last option is that they can simply jump to premium products that will increase their position them to a standardized level.
You really have to do a deep market research and if the output is in the same direction then jump to it.
When you are trying to come up with a price then make sure to consider your customer’s demand in mind.
They are the only one that is going to actually buy products and hence they must be your priority.
There are so many things that will follow up such as Brand, Convenience, uniqueness, fashion and scarcity.
When any product is launched, the company aim for profit.
Hence, you need to keep many points in mind that can help in increasing your productivity and the company’s profit rate.
However, you need to keep in mind that much higher price also attract competition to the market and that will be the last thing you want.
Right For Your Product
The most essential thing that must be in your focus is that, is this price doing justice to your product or not.
Always chose the price that is best for your product and simply not because you want to get in the market.
If the price is not right then getting in the market will do you no good. There are a few risks that you need to take but make sure that those risks are worth taking.
Also, follow up the strategy and model that is best for your product. This will guide you on what you must do and what is best for you.
The trend and cost of the market can help you in a lot of ways that you will give it credit.
The industry is changing at a really fast pace and it can be difficult to keep a track of it.
However, the sequence is not difficult to predict if you start to understand it. Quality and price are the main factors that will attract a target audience.
Also, it will ensure the financial stability of your startup. Hence, be careful while you price your startup’s product.