Setting the price on the product that your company offers is an art form that has many components.
You need to keep an eye on the competition to see what they are charging. You also want to understand how unique your product is in the marketplace and how broad the niche is that it serves. Beyond that, it helps to know the consumer perception of your product and where it fits in to the products you are already offering, or where it offers a new opportunity for growth.
A diversified product line will help you reach a broader spectrum of the consumer marketplace and give you a better opportunity to penetrate several niches.
That, of course, can mean a higher profit for your business.
Finding the right price
The first product I started selling had a wholesale price of $12, which I had paid in cash. In my mind, I wished I could sell it for $50 and get a well-deserved margin for my needs and the effort I had put forth.
I had bought that product with my last $20; I had no money for rent and was eating canned food. I really needed that profit, and better yet, I deserved it and wanted my margin to be big enough so that I could continue growing.
A question arose to me, however: What if no one buys it? That’s when the magic of the right price started.
The price of an item in a retail environment is part of the overall merchandising strategy the buyer has. What is your lead item? The lead item is a product at the lower scale of your presentation with a skinny margin that most likely you do not want to sell.
This item is essential for image as a retailer, even though your sales force should not push to sell it. You have to have a strong sales strategy in place that includes the features and benefits of your higher margin items with better profit. That’s where you want to guide your customers.
Maintain your perspective
Finding the right price between not overpricing and not underpricing your product is essential to keep your business robust and make your customers happy, while also providing to the many families that your business has under its umbrella.
At the end, all three parts of the equation must be satisfied: your customer, your associate and yourself.
The magic of setting the right price has evolved to include a new component, which is technology and the new ways that consumers can get what they want. Don’t forget to always evaluate the price war online and include it in your price-setting evaluation.
The online phenomenon isn’t going anywhere and will continue to affect your business, whether you want it to or not.
Stay in touch with your consumer and your associates and hear what they are telling you about your product and the way you present it. They are the best thermometers to help you to stay on top.