How to price your products or services?
Pricing can be based on:
Business Goals – what do you want to achieve?
Demand & Supply – what is the demand for your products?
Product Category – is it an essential product? Is it a luxury product?
Competitiveness – how many people are selling this already?
Market Size – whats your market size? How many people are looking for this?
Unfair Advantage – do you have a monopoly? Are you the only one? Are you selling something which no one else sells?
How to price your product/service based on Business Goals?
Let’s talk about how to price your product/service based on Business Goals.
You may price your product based on your objective. Is your objective is to:
Make more money – keep a good margin
Make more customers – keep less margin – make it affordable
Establish a brand image – brand it either as a budget or a costly product
Beat a competitor – quote lesser than the competitor
Attract a particular segment of customers – create variations of your products
Penetrate a new market – give it for trial, freemium, keep it very low
How to price your product/service based on Demand and Supply?
Let’s talk about how to price your product/service based on Demand and Supply?
Demand is more – focus on scaling, moderate margin, as competitors will also produce this
Demand Is Less – focus on customer acquisition, educate and create a need, keep less margin
Supply is more – focus only on getting more customers, less margin again
Supply is Less – focus only on getting more customers, keep a moderate margin, as competitors are bound to enter the market
Demand is More, Supply is Less – can price high, don’t exploit customers
Demand is Less Supply is More – think of adding value to your product so that you can be the best, price same as competitors
How to price your product/service based on Product Category?
Let’s talk about how to price your product/service based on Product Category:
Essential – it is a must-have product, govt. SAS regulations on these
Luxury – its a wish, or the desired product can be pricey
Branded – have lots of trust and warranty, pricey
Non branded – not many people know about it, less costly
Availability – if easily available, less cost and vice versa
Usability – how easy it is to use, more pricey
How to price your product/service based on Competitiveness?
Let’s talk about how to price your product/service based on Competitiveness.
The competitiveness can be based on:
Quality – if your product is better in quality, keep it same or higher
Reviews – if you got great reviews, don’t lower your price
Add on – if you are giving some additional benefits, keep it the same as the competitor
Based on CPA – if you are getting low cost per acquisition, keep it same or little less
Based on Margin – if you are getting good margin, keep it same or little less
Based on LTV – if you are looking at Life Time Value – keep it lesser, acquire more customers
How to price your product/service based on market size?
Let’s talk about how to price your product/service based on market size.
Large market size – This is good news and you can have different variations of the product:
– Keep less margin
– Watch your competitive pricing
– Serve a niche audience
Small market size – when your market
size is small, there are chances of
either tough or no competition, price
Market share – if your market share is less, go for discount, entry-level pricing to get more market share
How to price your product/service if you have an unfair advantage?
Let’s talk about how to price your product/service if you have an unfair advantage.
Zero competition – when you have an unfair advantage you can price based on the value, but dont charge exorbitant else you will get fewer people buying it.
Competitive advantage – when you provide that x-factor, you get more people coming to you, can charge more than competitors.
Monopoly – when you have a monopoly, people don’t really know the price, and whatever you charge they accept, but don’t take them for granted.
Empathy – have empathy towards your customers and they will reciprocate.
So, this is all about how you can price your products or services. Now you can apply these techniques in your business.