The profitability of a products correctly business is closely related to the product pricing process. When launching a product or service on the market, whether through a physical store or e-commerce, the company needs to follow certain steps to ensure that the product is competitively priced and, at the same time, does not compromise the financial health of the organization.
Setting the right price for a product is not as simple as it seems. If you are unsure whether your products are priced correctly or if you are planning to open a business and want to start off on the right foot, keep reading this article.
What is pricing?
In general, pricing can be defined as the selling price of the products you sell in your store. However, pricing goes far beyond simply putting a price tag on them. This process involves variables and calculations that need to be made to arrive at the correct price.
One of the main goals of pricing is to country wise email marketing list ensure that the price of products brings a positive financial return to the company. Therefore, it is important to keep in mind that revenue and profit are different concepts. For example, a company may have high revenue but low profit if pricing is not correct.
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However, this does not mean that the best thing to do is to increase the final value of the product to make a final profit. Planning is needed to know the ideal value to work with.
What to take into account when pricing products?
As we have already said here, the price the company offers commissions on charged must, at the same time, cover the costs of the business and generate profit for the retailer, without failing to be fair to the consumer who is buying.
Something that should be constantly monitored is the competitiveness of your product. In other words, how much the price of your product is above or below the average of your competitors. This is important because, although it is not the main factor, the price of a product is something that consumers take into consideration when making a purchase.
That being said, you need to know your chine directory customers. What is their profile, age range, purchasing power… Know who your target audience is. For example, if your customers are teenagers between 15 and 18 years old, their purchasing power is probably not that high, so charging a high price for a product may not be interesting.
In this case, it is up to you, the manager, to analyze what can be done to align pricing: reduce the profit margin, negotiate with other suppliers…
Another point you should analyze is the value of your product. But here, we are not referring to its selling price, but rather to the advantages that this product offers to your customers. What does your product add to your customers’ lives?
Price and value are closely linked. This is because the more added value you can convey to your product, the higher the price you will be able to charge for it.
Importance of pricing
You probably already understand the importance of pricing your products (or services) correctly. This process is linked to the healthy growth of your business and is crucial to its survival – since when a product is priced incorrectly, it can reduce profits or even cause losses for the company.
By carrying out the pricing process correctly, you will benefit from:
Increased sales: the correct price ensures the competitiveness of your product;
Leadership in the eyes of the consumer: recognizing the value of the product makes the consumer more likely to purchase it, positioning the brand in a prominent position among the competition;
Loss reduction: the final price of the product is defined through calculations and analyses;
Improves the company’s financial health: with greater control over the real costs of the product and the company, it is possible to evaluate where to invest more.