{"id":20847,"date":"2021-04-30T23:27:50","date_gmt":"2021-05-01T03:27:50","guid":{"rendered":"https:\/\/wordpress-715453-3009179.cloudwaysapps.com\/?p=20847"},"modified":"2021-05-05T10:19:46","modified_gmt":"2021-05-05T14:19:46","slug":"how-to-price-your-product-or-service","status":"publish","type":"post","link":"https:\/\/wordpress-715453-3009179.cloudwaysapps.com\/blog\/how-to-price-your-product-or-service\/","title":{"rendered":"Money Talks! How to Price Your Product or Service Effectively"},"content":{"rendered":"

If you want to succeed in business, one of the best things you can do is price your product or service fairly and competitively. With so many pricing strategies available, it can be difficult to determine exactly how to price a service or product.<\/p>\n

Pricing too low can be detrimental to your revenue while pricing too high can deter customers from frequenting your business. Below, we discuss everything you need to know about how to price a product or service effectively.<\/p>\n

How to price a product\u20145 strategies for success<\/h2>\n

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Once you’ve started a small business<\/a>, it’s important to set fair prices for your products that earn you revenue. While there are many tactics that come into play when determining your pricing, most are rooted in psychology.<\/p>\n

Tip: When shopping, people tend to look at the whole dollar rather than cents. Retailers and service providers often play into this by setting prices just below whole numbers, giving the impression that a product or service is actually less expensive than it is. For example, a $25 item or service would be priced at $24.99, seemingly less expensive. <\/div>\n

When determining the right price for your products, there are five top pricing strategies that you can use to ensure your charging the right amount.<\/p>\n

1. Cost-based pricing<\/h3>\n

Cost-based pricing<\/a> is a pricing strategy that businesses use to set product prices based on their cost of production, manufacturing, and distribution, as well as branding and marketing costs.<\/p>\n

Using this method, the overall cost of the product is determined by adding a markup\u2014a percentage increase from the manufacturing cost.<\/strong> While the exact markup amount varies from business to business, 50% is typically a good starting point.<\/p>\n

Because the cost of branding and marketing needs to be considered when setting prices using this method, finding affordable ways to market your brand and your products can go a long way when it comes to increasing your revenue.<\/p>\n

Using tools like a logo maker<\/a> can help to dramatically lower your branding costs and assist you in increasing your product margins!<\/p>\n

2. Competitive pricing<\/h3>\n

When using a competitive pricing model, you strategically set product prices based on what your direct competitors are selling the same (or similar) items for.<\/strong> For example, if your competitor’s product is priced at $40, you might choose to set your pricing higher or lower, while still using $40 as a benchmark.<\/p>\n

This is where the importance of branding comes in. If your brand is professional and has a strong differentiator from your competitors (i.e.you offer sustainable products, or higher quality products) your business could sell that same item for $50.<\/p>\n

This method works best when pricing products that have been available to consumers for quite some time. This way businesses and consumers have a general idea of the value of these items.<\/p>\n

3. Price skimming<\/h3>\n

Price skimming is a strategy that’s commonly used on high-demand or luxury items. Businesses initially set higher prices for their items, creating the perception that products are high-quality and worth a higher price.<\/strong> When using this strategy, businesses lower prices over time, making the product available to a wider market.<\/p>\n

4. Demand\/value-based pricing<\/h3>\n

Demand or value-based pricing uses customer demand to determine price.<\/strong> This strategy considers fluctuations in demand, meaning that as seasonal demand or the need for a particular item changes, so does the price. Demand pricing is often used for products such as clothing and seasonal items.<\/p>\n

5. Penetration pricing<\/h3>\n

Penetration pricing is essentially the opposite of price skimming. When a product initially hits the market, the price is set low to attract buyers and make the product accessible to a broader range of consumers.<\/strong> As the item’s initial sales fizzle out, the price increases in small increments to maximize profits.<\/p>\n

How to price a service\u20144 steps to getting it right<\/h2>\n

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Determining how to price a service can be more difficult than product pricing. After starting a service business<\/a>, there are several steps you should take when developing pricing strategies for your services.<\/p>\n

1) Decide how much you want to make<\/h3>\n

First, you need to decide how much you want to make. This is the time to dream big \u2014 think about what you truly feel your service is worth and how much you’d be happy to earn from what you do.<\/strong> This is your starting point and along with a few other important factors, it\u2019ll help you to determine the best price for your service.<\/p>\n

After thinking about your desired earnings, you need to do some research and calculations to see whether your goal is realistic. First, take a moment to calculate your costs. You’ll want to consider the following:<\/p>\n

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