One of the most critical decisions you will have to make is setting the price for your products especially if
you are just launching your new business. Unfortunately, a lot of people do not pay as much attention to
this as needed. Entrepreneurs put in all the work into designing and developing the product and tend to
neglect the economics and business side of things.
It might seem trivial but this is perhaps the most important aspect of the business. The price will affect
everything from customer influx to profit margin and consequently hiring. You need to give this serious
consideration. Don’t be tempted to just fix a price with the intention of changing it somewhere down
the line if it’s not working. There is no singular approach to price fixing but you can follow some
guidelines to help you pick the best price for your products. Some of them will be discussed below.
1. How valuable is your product?
To really get an idea of how valuable your product is, you will need to carry out extensive market
analysis and talk to your potential customers through focus groups and surveys. You can ask questions
like “What would you be comfortable paying for such a product?” or “What would be your reaction if
this product costs you X amount?” When you ask enough people these two questions, you can arrive at
a common ground and set a reasonable price.
2. What is the competition currently charging?
Value isn’t everything. You also have to set your price with the consideration of what your competitors
are currently charging for similar products. How is your product different from theirs and how will it
impact your price? With proper research of the competition, you can get a baseline for what you will
eventually charge your customers. Your price can be higher or lower than your competitors’ depending
on the nature of your product and how you think it will be received by your customers.
3. What are your costs?
At the end of the day, you are in business to make a profit so you need to calculate how much exactly it
costs you to create the product and make it market ready. You will have to take into account every cost
that goes into bringing the product to the customer. All of your manufacturing costs, development costs,
and other overheads will help you arrive at the minimum price possible to ensure you are a profitable
These are just a few helpful tips to help you understand what is important in setting the price. Product
pricing is critical to the success of your business. If you set a price way higher than what the average
consumer is comfortable spending, you will lose market share. If your prices are too low, you won’t earn
as much and some consumers might even assume your product is inferior. You need to find a middle
ground and take several factors into account before moving forward.