Learning how to price your products

Many companies are unable to succeed because they cannot seem to price their products appropriately. Learning how to price your products is essential for the success of your business as you could be making a big mistake. Market research is one of the best ways to learn how to price your products. This is because market research allows you to find out how much value customers place on products and how much they are absolutely willing to spend on a product. Here are some tips to help you learn how to price your products:

Tip # 1 - Costs

One of the most important things to remember when pricing your products is that you need to cover the production costs. Even if you only get a 3% mark-up on your products, you should never sell a product for less than the production costs; this is a quick way to lose your business fast.

Tip # 2 - Competitors

Before you start selling your products, you need to compare them to your competitor's products. How much are they selling their products for? Can you get your price to match theirs or be a few cents cheaper? The customers that are motivated on price will quickly choose your product even if it is a cent cheaper over your competitors.

Tip # 3 - Research

Never pick a price and go with it. You must do research, pricing something too low or too high will immediately indicate the value that it's worth. In fact, studies have shown that pricing a valuable product too low causes customers to avoid buying it because they assume something is wrong with it. To find out if you have the right price, do some product tests. Businesses like Sam's Club and Costco will let companies come in and test their products for a low fee. This is a great way to gain customer feedback about your product and it's a great way to know if you have set the right price on it.

You can pay a good market research to conduct the research for you and come up with a pricing structure. This is a great way to know how much you should charge, but it can get pretty expensive, especially if you start doing this for every product.

Tip # 4 - Product Guarantees

If you need to charge more money for your products actually make a profit, consider offering a product guarantee. Even a 30 day product guarantee will remove some of the "risk" that may be associated with paying a higher amount and this can convince some people to buy it. People that purchase a product that includes a guarantee normally don't return the products, allowing you to charge more and assume less risk.

Tip # 5 - Payment options

One of the reasons why some people are hesitant about buying products is that they can't pay for them. If you can offer credit or some type of payment plan to your customers, they are often willing to buy a product for a higher price. The downside to payment options is that you need to have enough money in your cash reserves to cover the cost of the products while you wait for people to come up with the money to pay for them. Encourage people to pay faster by offering discounts for early pay-offs. This way you get your money faster and you assume less risk.

If people aren't buying your products, you have probably priced them wrong. Consider altering your prices and send out ads to your customers to let them know of a "sale". This will create a sense of urgency and get people shopping again.