One of the most difficult situations many novice marketers and business-people of all kinds are faced with is how to price products and services. Charging too much will hurt your bottom line and reduce your profits, but so will charging too little. Finding the right price to charge can be tricky, but multiple studies have been conducted to help find the best way to price products and services, revealing a number of useful insights about the human mind in the process.
Understanding how customers view the price and value of your products, and using proven pricing strategies, can help take the guesswork out of pricing and selling your products and services.
If you’re trying to decide how to price your product, or wondering how the process of marking-up an item works, read on. You’ll learn about how cost is determined, why some items sell for so much more than their cost, and how you can decide the best price to sell your product for.
It’s sometimes hard to see how items are priced. Sometimes the cost to the final buyer is much more than for the retailer that sold it. Some prices are marked up hundreds, or even thousands, of times more than they cost to the seller. How can an item bought for so little sell for so much? Is it because sellers are greedy, and want as much profit as possible, or is there another reason?
Sometimes greed does indeed influence the price a product sells for, but often, items must be marked up so sellers can make a profit. While some sellers artificially inflate their prices to take advantage of their clients, most successful merchants know that exploiting the people they depend on for their continued existence is a poor way to run a business, and charge only as much as they need to cover their costs and make a modest profit.
Have you ever wondered what to charge for your products? Charge too much, and nobody will buy. Charge too little, and you won’t make enough to continue selling products. But finding the sweet spot when pricing your products is hard. So how can business-people determine how to price their products or determine how much to mark them up?
Find Your Cost First, Then Your Selling Price
When deciding on a price for you product, or how much to mark something up, the most important thing is determining how much your product costs you. If you pay $10 for the supplies to make a single gift basket, you may think your selling price shouldn’t be much higher, but don’t forget; you also have to add in any other factors that increase your costs. For example, how much electricity do you use to assemble each basket? How many labor hours does each require, and how much does that cost you on average? Finding a price to sell your product for is much easier once you know where every penny spent in the process goes, and what it goes for.
