Set the Right Price

In order to Price your product accordingly and in-line with what your market is willing to pay, you’ll want to consider what it costs to provide your products and services, plus all the other costs of doing business that come along with it.

Learn what your competitors are charging for similar services or products. Be mindful of how much your product or service goes for in other marketplaces as well, and learn about who makes those purchases. Having this information will help you determine if you should do premium, penetration, or economy pricing.

Premium Pricing

With this strategy, you keep your price artificially high so you can promote an image of having a premium product. This is one way that some luxury companies try to differentiate themselves from the competition. While this strategy can elevate your brand, you risk alienating customers and driving them to your competitors. What you gain in brand perception you lose in market share

Penetration Pricing

With penetration pricing, you introduce your offering to the market at a low price in order to break into the space. On the plus side, it helps you to get established, but one drawback is that it’s challenging to encourage repeat business when you ultimately raise the price.

Economy Pricing

When you set your price low in order to make a small margin of profit, you are using economy pricing. This works when you’re able to start delivering the product at scale in bulk or to several customers, and you’re able to draw in large quantities of customers on a consistent basis.

When it comes to pricing, you typically want to come in at a rate that the market feels is fair and provides value for having their problem solved. While you can compare your prices with those of your competitors and with the cost customers pay for other options and workarounds, your best bet is to go to show your product or service to your audience and ask them 1) if they’d pay for what you’re selling, 2) how much they’d be willing to pay.

It’s up to you to balance that with what it costs you to provide the goods or services so you can generate a profit.