Setting the right price on products is a serious decision that a business owner must make.  Needless to say, pricing to high will discourage buying customers.  On the other hand, pricing too low can put your business in danger.  Therefore, analyzing prices can make or break a business.

Setting the Right Price: Factors to Consider

Obviously, it’s not just about making profit.  In setting the price, there are three major things a business owner needs to consider- the cost, target market and competitors.

The cost must cover fixed and variable expenses incurred to get the product.  These include materials required to manufacture the product, cost of labor, building leases, marketing costs, etc.  Be sure that you set a price per unit of the products you are.

Next, you need to take into account your target market.  How will prospective customers perceive the value of the products you’re selling?  The perceived value is directly dependent on the brand name and the reputation of the company.

For example, people are willing to buy branded items despite the fact that they are more expensive than non-branded ones since people perceive brand name guarantees high quality.  This is why, new businesses that have yet to establish a name in the industry cannot price products to high, since they are still introducing the company to the market.

Of course, a business owner needs to check whether there is a great market demand for the products he/she plans to sell.  If there is a high market demand, then it will not be difficult to promote your products while a low market demand may force an entrepreneur to sell at a lower price.

Another important factor to watch out is your competitors.  How many other companies offer the same products that you do?  While a strong competition can be expected, you need to make sure that there will be enough room for your and the other companies to compete.

Pricing Strategy for New Businesses

If you are a new business, testing or trail pricing is an important step to know if you’re pricing right.  You may start with a lower price to “test” how your target market will respond.  Although this would initially mean a lower range of profit, all new businesses generally go through this stage.

If the market response is positive, you can gradually increase your price until your reach the maximum acceptable price for your products.  To attain that status, an entrepreneur needs to assure the quality of the products being sold.  In time, customers would be willing to pay your asking price if they know that they are satisfied with your service and are getting their money’s worth.

About the Author

Luie De Von is a marketing consultant with Easy Postcard Marketing and has been providing consumers and business owners with marketing strategies. For years he has helped businesses to have more and growing clients through campaign internet marketing, direct marketing advertising and post card marketing.