6 Steps to Price Your Product so that it Sells
By Acey Gaspard   ©2004 All Rights Reserved

Pricing is a balancing process. You want to create a price that is low enough to be accepted by your market, but high enough to make you the greatest amount of profit. To do this, follow these 6 steps:

1. The first step in defining a price is to determine your costs. In this article, I will keep it simple and concentrate on the cost per product. I will not take into consideration the fixed cost of your business such as rent, phone, etc., because these costs will change in accordance to both sales per period and the number of products you offer. So begin by accounting for the your initial cost plus the cost to get the product to the consumers, such as marketing, shipping, handling, and credit cards or bank fees. 2. Now that you know your cost per product, do some research and find out the competitions' price range. Analyze products that are in direct competition with yours. If you sell DVD players you shouldn't research VCRs. Only make a comparison of items that closely resemble your product. 3. If you know the characteristics of your audience, it will be easier to create a price that will be acceptable to them. Without this information, your business will be more apt to fail. For example, try selling an in-depth marketing course complete with audiotapes, videos, a hands-on workbook, and 12 months of unlimited phone support for $2000.00 to someone who does not even know how he will pay his bills this week. Then try selling this same course for $19.95 to a well-established businessperson seeking ways to improve his business. In the first case, the person couldn't afford to buy the course even if he wanted to. In the second case, you won't make the sale because the low price will cause you to have a credibility problem. 4. Decide on your desired position in the marketplace with regard to price. A high price coupled with a quality product conveys the message that your product is superior to that of the competition. Low prices convey the message that you are focusing on discount selling. So what does a middle price convey? In-between pricing doesn't say much, does it? If you decide on the high price category, be sure to add value to your product. You can do this by bundling multiple products, giving a guarantee that is unheard of in the industry, etc. Most people under price, or "lowball" their product, because they think that a) people won't pay the higher price, b) their product is not worth it, or c) they will make more sales with a lower price. Your products won't sell themselves. You must take the time and effort to create a marketing strategy. This is one of the most important parts of your business. It will take the same amount of effort to create a marketing strategy whether your product is priced high or low. The steps involved are identical. Selling for less may result in more sales, but it will also mean less profit, which translates into marketing that won't allow for mistakes, or limited support for customers. Also, it will be difficult to improve upon your product because low profits won't allow for the added expense and customer service will suffer. You will end up working too hard for the profits. Selling for more allows you to increase your marketing and improve quality, customer service, and support. Also, when you're making a good profit in your business, you tend to stay motivated and expand your business as opposed to just getting by. 5. The above steps are a good beginning, but fine-tuning the process means taking the market into consideration. It is the market that will set the ultimate price. I suggest that you start off with a low price, test the market and record the results, then raise the price and test again. Keep doing this until you notice that sales are starting to drop off. When you get to the highest point before sales drop off, you have found the ultimate market price for your product. Be sure circumstances are similar for each of your tests to ensure that it was the price that caused a change in sales and not some other factor. 6. By now you should have determined the optimal price for your product based on your market. The final step is to make sure that this price will be profitable for you. If you find that it won't be, you will then have to find a way to cut costs without sacrificing your product's perceived value. Take the time to fine-tune your pricing and you will reap the benefits from increased sales and profits, or, at the very least, be reassured that your price has been right all along.

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ACEY GASPARD ACEY GASPARD, author of the e-book, "A Touch of Business," has over 18 years of business experience to share with you. If you want your business running at peak performance then explore the powerful collection of street smart money making tools created by many famous business authors, found at: http://www.atouchofbusiness.com/acey

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