New product? "Then off to market it!" This is how many entrepreneurs think and immediately rush into sales when launching a product. However, pricing is an important process that should ideally take place calmly and without rushing.
Pricing a product appropriately can be a rather complicated matter. Young companies in particular, who want to launch completely new products on the market, often have problems finding the right middle ground - especially because the brand behind them 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 not be sufficient. Finding the right balance is sometimes very difficult.
In this article, you will therefore find valuable tips on how to put the right price tag on a product and recognize potential problems and stumbling blocks at an early stage.
Many new customers, numerous invoices, a growing product catalog, subscription or one-off payment as a business model? With nexnet as your partner, you can do it all.
Choose the right price model
Decide on a pricing model that suits your business model. You have various options, such as
- Cost-plus pricing: Based on production costs plus a profit margin.
- Value-oriented pricing: Setting the price based on the perceived value for the customer.
- Competitive pricing: Orientation towards the prices of the competition.
- Dynamic pricing: Flexible pricing depending on supply and demand.
Looking inwards
Orienting yourself to your own costs is a simple principle that is particularly easy for beginners to follow. What are the manufacturing costs of the product? What are the running costs that need to be covered? Is there a one-off purchase price or is there a subscription model? No matter what the answers are here, you should of course not forget the profit margin - after all, you have to keep your company profitable somehow.
After answering these initial questions, it is relatively easy to find a figure 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, even the best calculation is useless.
How much would you pay?
Good entrepreneurs are convinced of their products - and usually rightly so. But a critical look can also help: Put yourself in the customers' shoes and take a skeptical look at your product. Would you pay that much? Customers are particularly reluctant to buy start-ups and less well-known products because they don't even know whether they like the product. The solution: Try to find out how much your target group would pay for the product and include your desired price in the calculation.
Above all, good customer service is essential for continuous evaluation. Because to find out what people think about the prices, you need established and simple communication channels.
What are the needs and expectations of the market?
It is not only important to look to the right and left when crossing roads, but also when pricing your products. Get to know the needs and expectations of the market and your customers. Also ask yourself how your competitors' products are priced. These values can be a great guide to help you and your own product get into a better position. This is also where the start-ups' favorite word comes into play: the USP (Unique Selling Point). Knowing exactly what differentiates your products from those of other providers can help you to better estimate the price you will ultimately have to charge.
In a nutshell: If your product is cheap to manufacture, you can beat the competition on price. If the product has a certain advantage over the others, you can price it higher.
Prices are flexible
However, there is one thing to bear in mind with all tips and parameters: The price should never be completely set in stone! The market situation or the company's position can often change, so it's worth taking another look at the prices of products. Special situations such as discount campaigns can also entice customers to make a purchase when the product is actually priced higher. For online stores in particular, the question of shipping is also important for pricing - depending on whether customers should pay for shipping themselves or whether you prefer to offer free delivery, shipping must be included in the price.
It can get complicated very quickly
Add to this various payment models and expansion abroad, and things can quickly become very complicated. If you ship your product to another country, you also need a tax ID for that country and have to pay the local tax rate. Keeping the price constant is a rather complex task in terms of calculation. If the product is not a physical product at all, but a subscription or SaaS solution, it can become 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 you have sufficient expertise at this point.
Anyone looking for help here has already come to the right place.
nexnet automates this process and manages the creation of invoices and billing. In addition, user data is analyzed in order to draw the ideal conclusions.
The solution for flexible pricing with growth opportunities
The most important findings summarized:
- Pricing is a continuous process:
- The market and customers are in a constant state of flux, so it is necessary to constantly develop your product and pricing.
- The price of your product is a signal of its quality:
- Communicate with your target group to find out how much they would pay for the product and include your desired price in the calculation.
- Your pricing strategy also influences your company's growth:
- The way in which you build your go-to-market strategy and recruit the appropriate team is significantly influenced by the price of your product and the nature of the buying process.
- Put your trust in a reliable partner for pricing:
