Price: More than Just an Amount
Generally, the price of a product is the amount of money buyers have to pay to get the product. It can also be tagged or referred to as the specific amount of money a seller sets on his or her goods or services for sale. This means that the price of a product determines whether the product will remain with the seller or will become that of the buyer i.e. price dictates the status of every transaction involving goods and services. If the buyer is able to meet the seller’s asking price for a product, the seller transfers the ownership of the product to him or her. But if otherwise, the product remains the seller’s property.
In a more technical sense, product prices are more of products’ worth in term of value than arbitrary setting of random amounts as the price of a product. This means that product pricing is all about an entrepreneur’s perception of his or her product’s value. In other words, the price of a product is equivalent to how much a producer thinks or believes his or her product is worth. In this case, product selling is an exchange of value between a seller and a buyer: a buyer purchases a product if the buyer considers the value of the product and the amount placed on it equal. Buyers often opt for price haggling when they think a product’s value is not equivalent to the amount set on it by the seller.
Product pricing is an aspect of branding because it is reflective of every company’s set of goals and ideologies. Companies embrace different brand types in accordance with the range of price they intend to set for their products. As time goes by, companies are identified by their pricing practices. Some companies are renowned for setting expensive prices for their products irrespective of the products’ quality while others choose to make their products affordable. This explains why different companies have different prices for the same product.
There are many factors influencing product pricing; the most important of all being the cost of production. The amount of money companies spend to manufacture their products usually inform the cost of their products. Since product pricing is like an investment which is expected to yield epic conversions in form of profit, companies expectedly consider how much it costs them to produce their products when setting their prices. Another factor is the company’s target goals. The higher the profit many companies aim to make, the higher they set their price. It is, however, cleverer and advisable for companies to reduce their products prices in order to attract more customers. This will not only increase their rate of turnover, it will also make them to achieve even more than they set out to without losing customers.
Product pricing takes at least two dimensions: close pricing dimension and open pricing dimension. With close pricing dimension, I mean the practice of setting a fixed price for products. This is common with supermarkets and variety stores. They attach non-negotiable price tags to their goods to achieve sales uniformity and avoid cases of price haggling. On the contrary, open pricing system encourages negotiation. It is an act of making a product’s price irregular. This implies that there is no fixed price for any product in open pricing dimension.
A Step-by-Step Guide to Setting the Right Price for your Product
No doubt, the ultimate goal of every private company or establishment is to maximise profit from the sales of their products. Meanwhile, it is almost impossible to convince buyers to purchase a product whose price is ridiculously high. Since buyers won’t patronise costly products and sellers’ only means of maximising profit is by selling their products, it becomes important for sellers to master the act and art of setting the right price for their products. Thus, this article will teach you how to set a high-converting price for your products to attract a lot of buyers. Following the steps below will help you to set the right price for your products, and that will multiply your sales beyond your expectation.
- Study your Market: Also known as market survey, it is an act of making scientific enquiries about the realities of a market. It involves known the nature, trends and downhills of a market for the benefit of production and branding. Market survey makes it possible for producers to set the right price for their products because it exposes producers to the past and current sales statistics of the market. This means that with market survey, a seller can know customers’ attitude to existing pricing systems through their response in term of purchase.
For this reason, every product that is doomed not to sell starts its journey with little or no market survey at all. This is because lack of thorough market survey results in either over-charging or under-charging for products by the seller. Unfortunately, both are harmful to sale. If the demand for the product involved is high but the seller fixes a low price, buyers could be forced to think the product is a counterfeit or is adulterated. Similarly, if the demand for the product involved is quite low but a seller fixes a high price, few buyers available will be scared away and low turnover will be recorded.
Adequate market survey also makes it possible for sellers to enjoy the benefits of pricing variation which involves setting different prices for a single product at different locations. For instance, if the demand for a product is high in Europe but low in Asia, you can set a high price for it in Europe to meet the standard and a low price for it in Asia for effective competition. This is advantageous because it is a way of flowing with the numerous trends of the market without making any costly mistake that can negatively affect the sale of your products. If you truly want your products to sell like hotcakes, then you have to study your market very well.
- Know your Customers: The process of product selling starts before production itself, and one of the key pre-production stages in product selling is familiarisation with customers and potential customers. This should be done so as to know the need of your customers including their psychology and their financial buoyancy. No matter how good you think your product is, it is not going to sell if no one needs it. Therefore, you must ensure that you tailor your production towards your buyer’s need if you want your products to sell. To do this, you have to be solution-oriented i.e. your product should aim to solve one problem or the other of your customers. Once your product is customer-centred and solution-oriented, you will have no problem selling it.
This should be followed by studying your (potential) customers’ attitude to different variants of your product. There are customers who believe certain products must be expensive for it to be effective. This could probably be because of the nature of the function the product performs. In such a case, try to know what your customers think of the pricing of different variants of your products. This will help you take the right pricing decision. In fact, you can explore this to dominate the market with your product.
How is this possible? If buyers feel cheated by the price of some products related to yours, you can beat your price down and win the heart of millions of customers. Your products might only need to be subjected to quality test by buyers for them to have total trust in it. If it passes the trust, it will become their choice, and it will consequently become difficult for other products to compete with yours even if their price is later reduced too.
The last component of this step is knowing the financial buoyancy of your (potential) buyers. An average buyer of your product should be able to raise your product’s price if you want it to sell. Buyers who belong to the working class cannot be compared to those who are students in term of financial buoyancy, hence products targeted at the two categories should not be of the same amount. No matter how much buyers need your product, they are not going to patronise you if your price is too costly.
- Consider Your Competitors’ Pricing Strategy: This is all about competitive pricing. It does not only involve putting into consideration how much other companies sell your product, competitive pricing also has to do with examining the measures other companies put in place for buying customers. Let the product prices of your competitors play a role in your price setting decision. If there is a significant difference between your price and that of other companies selling the same kind of your product, buyers might shun your product.
Note that I am not saying that your price must not exceed your competitors’ price. If your product is of higher quality, it is understandable that your price can be higher too but the gap should not he too wide. You can also explore pseudo pricing in this case to lure customers to buy your products. Always set two prices (a pseudo price and an original price) for your product to make your customers think they are getting a discount. For instance, if a product is supposed to cost $15, tell your customers it costs $20 but you’re running a bonanza which takes 25% off from it. It is a good way of making customers buy your product immediately without considering how much they are actually paying.