Determining Prices Suitable to Customers
Determining the perfect price for a product can be an overwhelming affair. Coming up with a high-quality product does not guarantee huge profits. When one sets a high price, it will keep the customers away. When they put a low cost, the profit margins will lower and keep them out of business. Setting the right price will generate the significant profits one is looking to achieve. Here are tips on how to determine a suitable price for customers.
• Conduct A Market Research
The first step is to conduct market research. It allows one to understand their target audience, what they are interested in and their financial situations. In addition, one can evaluate the products already on the market, their price and their quality. According to pain management specialist Dr. Jordan Sudberg, market research gives one a chance to study their competitors, products, and pricing. By analyzing competitors, one can learn their pricing strategies and how often they change their prices. If a competitor’s product is low quality, one can set a higher price. If it is of high quality, one can set a price lower than what they are offering. The market research gives one a better understanding of the market, from which they can determine the most suitable price for their products.
• Consider The Production Costs
Production costs will help one set a threshold on the price that will generate the desired profits. These are the sums of money spent on manufacturing the product. One ought to calculate both direct and indirect production costs. Direct production costs include raw materials, equipment and labor costs, whereas indirect production costs are the technology, administrative, sales, marketing, and other costs. Through this calculation, one can get an idea of the amount they have spent to produce each unit, from which they can set the right price to satisfy customers and avoid losses.
• Outline The Pricing Objectives
Dr. Jordan Sudberg comments that knowing what one wants the pricing to achieve is vital when determining the right price. Pricing objectives should apply to both new and existing customers. Some of the objectives include penetrating new markets, maximizing short term and long term profits, increasing sales volume and beating the competition. For example, when penetrating a market, one can consider setting low prices to attract more customers. However, the pricing objectives change over time. The most important thing is to identify the objectives at the moment and build on them to come up with a favorable price.
• Understand The Pricing Strategies
There are various pricing strategies one can use. Common techniques include value-based pricing, cost-plus pricing, competitive pricing, price skimming, penetration pricing, economy pricing and dynamic pricing. To choose the most suitable strategy, one must understand their customers, competitors and what the product does for the customers. It will help them pick a strategy that works well with their business model and generate the desired sales.
Setting the right price for a product is the secret to successful brand development. With an unsuitable price, the product cannot generate sales no matter how good it is. These tips will help business owners determine the prices suitable for their customers.