Pricing a product/service is always tricky. The general rule is to always choose a pricing strategy that works for you keeping in mind your costs, target audience and competition. Here are a few additional things you can do to help you price your product.
Pricing is a function of your ability to sell
According to JC Penney, “our very living is selling, we’re all sales people”. Your ability to sell your product or service makes a lot of difference and can determine how valuable your customer perceives your product to be. This can explain why one company’s product can be very highly priced whilst another of very similar qualities has a much lower price.
As much as possible, differentiate your offer
If your competitors all price in a particular range, then you may have to consider remaining in the same bracket. However, to drive sales, you need to demonstrate clearly to your customer what differentiates you from the competition and why they should choose you. In short add value to the product. To do this, understand your target market and what matters to them and more importantly what they’re willing to pay for.
Test different price points
This is an important exercise that could help you settle on the right price for your product. Since your customers are going to purchase your product, it is important to let them show you what price they are willing to pay for. A split test involves splitting your customers into smaller segments and testing different price points in those segments. The final price can then be determined by the conversion rate of the price points.
Whichever strategy you use to price, you always need to remember the value of your product is not so much of the features and add-ons you offer; it’s what your customer is willing to pay for.
What other factors have you considered when pricing your product? Can you share with us?