One of the hardest things to do in creating a product or service is to set the price – too high, no one will buy because it’s too expensive; too low, no one will buy because they think what you’re offering isn’t valuable.
So how do you determine your pricing strategy?
- Determine whether this is something that can be a “loss leader” or whether it needs to break even or turn a profit. That will help you determine your floor price.
- Think through the amount of resources that go into creating and maintaining what you’re offering – make sure you account for both *direct* (aka, actual money) and *indirect* (aka, things like staff time) costs. This also helps set the floor price.
- Look at what your sister organizations/competitors/collaborators are charging for similar products. That will help you figure out what the market is expecting and will bear. It will also help you figure out demand.
- Forecast whether or not you’re going to want or need to offer any sort of discounts (i.e., for bulk orders or member versus non-member pricing). If so, the price for the first one needs to be high enough that you can discount later on.
- Determine your marketing goal.
- Make your best estimation based on all the above!
- Test it! Get your product out there and see what happens.
- But remember – it’s much easier to drop a price that was initially a little high (or offer discounts) than it is to raise a price that’s too low, without some sort of major relaunch of whatever the product is with some ostensible reason it should now cost more.
For more information on pricing strategies, see:
- NetMBA: pricing strategy
- Seven Pricing Strategies That Improve Profit
- The Marketing Mix: Pricing Strategies (this one has a video!)
Image credit: Zenoss