Determining the right price point for your product may be one of the hardest parts of launching your business, and quite understandably so. Your profit margins and cash flow both rely on your product’s price. It can be challenging to find that sweet spot where your product stays affordable but earns decent revenue to keep your business afloat.
First, you’d want to find out the cost of goods sold. This is simply the amount spent purchasing each unit. If you make your products, make sure to price in the time you invested. Once you have the cost of goods sold, add the other costs such as shipping and packaging, affiliate commissions, etc. That is your total per-product cost.
Next, add your desired profit margin. For instance, if you want a 50% profit margin, double the cost of your product, and that is your final pricing. However, while this may be quite flexible, you shouldn’t just come up with any number. Remember that underpricing can be financially disastrous while overpricing would lose any competitive advantage you may have.
Don’t forget to account for fixed expenses. These costs stay the same and are essential to running your business, such as rent and loan payments. Ideally, you’d want these covered by your product sales too.
Lastly, study your competition. After all, your customers will shop around. Don’t worry because most will likely settle for the best value for their money, but that is not necessarily the cheapest. This enables you to have a slightly higher price for a superior product.
Kadence International uses more sophisticated techniques when it comes to pricing. They can help you determine the value consumers place on certain features and create special bundles to drive sales. They will test different price points and assist you in getting a nice revenue yield while remaining competitive. Visit this link to learn more about their full offerings.
