The Price Is Right: Strategies for Finding the Ideal Price for Your Products

This is a balancing act. A low price isn’t always ideal, as the product might see a healthy stream of sales without turning any profit. Similarly, when a product has a high price, a retailer may see fewer sales and “price out” more budget-conscious customers, losing market positioning.

Ultimately, every small business will have to do its homework. Retailers have to consider factors like cost of production, consumer trends, revenue goals, and competitor pricing. Even then, setting a price for a product isn’t just pure math (numbers behave in a logical way; humans, not so much).

• Understand costs. If you order products, you have a straightforward answer of how much each unit costs you, which is your cost of goods sold. If you create products yourself, you’ll need to determine the costs of your raw materials.
• Define commercial objective. Think about your commercial objective as your company’s pricing guide.
• Identify your customers. Consider the disposable income your customers have.
• Find your value proposition. What makes your business genuinely different? To stand out amongst your competitors, you’ll want to find a pricing strategy that reflects your values.