A lot of clients want to know how they should be pricing their product or service. If you get it wrong you’re wasting your time. We’re going to go through it today. 3 tips to help you price your product effectively.
1. What is your product?
Understand what your product is. Is your product what you’re actually selling? Or is your product offering peace of mind?
In accounting, our product is tax returns. But is it really what we’re providing? Aren’t we providing peace of mind, surety and financial stability to our clients?
2. It’s all about the value!
You need to understand what you’re actually providing. It’s not just the product. It’s the value of the product.
One of my clients makes hydraulic hoses. He was providing $10 hoses. But if that hose didn’t work for two hours, it was missing 23 ship containers coming off the load. So he was actually providing security knowing they could get their job done.
3. Get all your costs right
Most of the time businesses go bust because they sell things too cheaply. Have you heard that saying, “the lost leaders”? Those big markets, like Coles with their Down Down Down commercial.
They know the bread costs them $1,97 but they’re prepared to sell it for $1 on the hope that you’re going to come in and buy some more stuff.
If you don’t know how to price your products you could be down down down the gurgler. It’s really important to get those costs right.
Understand exactly what makes that profit or that loss. And if you’re going to lose money on it make sure you’re doing it for the right reason.
When you price your product think about the margin you want to make. If you’re selling $10 worth of stuff that costs $3? That’s a 70% gross margin. If you’re selling for $10 and it costs you $5, that’s a 50% gross margin.
You need to work out all of this before you start pricing your product.
Just because somebody prices their products in a particular way doesn’t mean you should do the same.