Any entrepreneur at any time has gone through or will go through the process of pricing her product or service. For every company it is key to set the right price to capture the attention of customers, therefore it is a difficult process and at the same time decisive.
That is why today we share with you some techniques that can help you set the price of your products or services.
The simplest would be to apply the theory of pricing, which consists of:
1. Adding up the total fixed costs and total variable costs.
2. The sum of fixed and variable costs / Your total production = Cost per unit
3. To the unit cost we add the % of profit we would like to obtain and… done!
The thing is a little more complex and we must consider some other factors. Today we want to share with you some tips that can help you.
Tips to set your prices:
– List your costs
Take into account fixed costs (salaries, etc) and variable costs (raw materials, etc).
– Identify and evaluate the market
Study the target audience to which your product or service is going to be directed. Know where they are, how they act, their consumption habits, their purchasing power, how much they are willing to pay and what their economic position is.
– Define your margin
Establish how much you want to earn or how much you think your product is worth. We recommend a percentage of the unit cost (e.g. 30%).
– Study your competitors
Analyze your competition’s prices for reference. If the price is too high, we run the risk that it will be considered expensive and of poor quality if it is too low.
– Evaluate your value proposition
Today consumers not only value the product or service, but also the experience. Therefore, it is important to know: What differentiates you from the competition? What is your value proposition? How good is your brand’s reputation?
Even if we offer an incredible service or sell a unique product, this will not be enough if our price is not in line with the market.
What do you think about these tips? Do you apply any of them?
Article written by our collaborator: Camila Zanchetti