While there is a lot of gray areas when it comes to business, one thing is certain — there is a “right price” for your product.
The “right price” is simple. It’s whatever your target market is willing to pay once they know the unique value your product offers.
Unsurprisingly, pricing is one of the most important decisions in the product development process. So it’s important to do your research and set the right price from the get-go.
In this guide, we’ll show you how.
Cost VS Value
When thinking about pricing your product, it’s important to understand the difference between cost and value.
Cost is how much is needed to produce and deliver the product. Value is the perceived benefit of the product to the customer. Prices are based on value, and the overall goal of marketing is to communicate value to your audience.
Research The Market
One good way to come up with pricing ideas is to examine the market and see what other companies are charging for similar products. This gives you an idea of what people are willing to pay, but also helps you set a standard for pricing.
You can set your price just under your competition’s to undercut them, or position your product as the luxury version and set the price higher.
Know Your Target Market
Knowing your audience well is crucial if you want to properly communicate value. Spend some time compiling data you can use to create a customer profile.
Part of this profile includes their buying behaviors and attitudes. This will tell you how much they’re willing to spend. This research will also reveal which problems your audience is suffering from so you can position your product as the solution.
Your price should at least cover the costs of making and delivering the product.
Figure out production costs, and then decide on the margin you want to receive per unit over that. Combined with your marketing research on customers and competition, you can find the right price that will make your offering both profitable and a good deal for your customers. Keep in mind the fixed costs and the variable costs that you can adjust if you can have some flexibility.
Test The Market
There are several ways to test the market with your pricing. You can hold focus groups where you present a few select audience members with a sample product and get their opinions on how much they’d pay for it. You can also offer a soft launch to see how much you sell at your chosen price.
Offer Flexible Pricing
If you’re having doubts about if people will pay your right price, you can always offer multiple pricing options. This is a win-win because it gives them more choices and helps you sell more products.
Create different levels, from Basic to Deluxe. The lower levels have fewer features and a lower price tag, while the higher levels offer more at a higher price.
Another flexible pricing option is to offer bundles of products together. The bundle is priced lower than if the customer bought each individual product alone.
Start Considering Price Early
Don’t wait until the last minute to start thinking about the price. In the early research phase of your product development, start thinking about how you will price it and researching the market and your customers. It’s a crucial decision that shouldn’t be taken lightly.
Do you want to learn more about creating a completed and detailed customer profile? Check out my Market Research Mastery System, which teaches you the A to Z of target market research and how to use it to increase your sales.