New product? “Then off to market with it!” That’s how many companies think and immediately rush into sales when a product is launched. In this regard, pricing is an important process that is best done calmly and without rushing.
t3n – from 25.11.2021 – 3 min. Reading time
Pricing a product appropriately can be quite a complicated thing. Especially young companies and start-ups that want to launch completely new products on the market often have problems finding the right middle ground – especially because the brand behind it is not yet very well known. The fear: If the price is too high, in the worst case no one will buy the product. But if the price is too low, the profit margin might again be insufficient. Finding the right balance is sometimes very difficult. In this article, you will find valuable tips on how to put the right price tag on your product and how to identify potential problems and stumbling blocks early on.
The view inward
Being cost-conscious is a simple principle that is especially good for beginners to follow. What are the manufacturing costs of the product? What are ongoing costs that need to be covered? Are you talking about a one-time purchase price or are you dealing with a subscription model? No matter what the answers are here, of course, don’t forget the profit margin – you have to keep your business profitable somehow.
After answering these initial questions, you have relatively quickly found a number that works well for the company. However, this sum is usually somewhat utopian, because one thing has not yet been taken into account: the customers. If the price is not accepted, the best calculation is useless.
How much would you pay?
Good entrepreneurs are completely convinced of their products and usually rightly so. But a critical look can also help: Put yourself in the customer’s shoes and take a skeptical look at your product. Would you pay that much? Especially with start-ups and unknown products, customers are reluctant because they don’t even know if they like the product. The solution: try to find out how much your target group would pay for the product and include their desired price in the calculation.
Here, good customer service is the key to continuous evaluation. To find out what people think about your prices, you need established and simple communication channels.
What does the competition say?
Not only when crossing roads, but also when pricing your products, it’s important to look right and left. How are the competing products priced? These values can be a super orientation aid to better classify yourself and your own product. Now, moreover, the start-ups’ favorite word comes into play: the USP (unique selling point). Knowing what exactly differentiates your products from those of other vendors can help you better estimate the price you’ll ultimately charge. In a nutshell: If your product is cheap to produce, you can beat the competition on price. If your product has a certain advantage over the others, you can price it more.
Prices are flexible
With all the tips and characteristics, however, there is one thing to keep in mind: The price should never be completely set in stone! Often, the market situation or the position of the company can change, so it is worth taking another look at the prices of products. Special situations such as discount promotions can also entice customers to buy when the product is actually priced higher. Especially for online stores, the question of shipping is also important for pricing – depending on whether customers should pay for shipping themselves or if you prefer to offer free delivery, shipping must be included in the price.
It can get complicated very quickly
If different payment models and expansion abroad are added to the mix, things can get very complicated very quickly. If you ship your product to another country, you also need a tax ID for that country and have to pay the tax rate there. Keeping the price constant becomes quite an extensive task from a costing point of view. If the product is not a haptic product at all, but a subscription or SaaS solution, things can get even more complicated. The more you include in your pricing, the more appropriate the price will be in the end – but at some point you will get lost in the forest of numbers unless your expertise is sufficiently high at this point.
Anyone looking for help here has already come to the right place.