Pricing is hard!
There are many ways for setting the price, but how to set it RIGHT?
Definitely, all companies don’t want to sell “so cheap” neither nor “so expensive”. If selling so cheap, you will lose your profit. If selling so expensive, you will lose your customers. Therefore, it is hard decision, many peoples are facing many struggles to set the retail product price. A lot of calculations, analysis, and strategies are putting together in order to set price correct. Especially in retail, in the fierce competition, price is quite sensitive.
What you need to know before setting price for your product:
- Know your customers: You need to know how your customers are thinking about your product, your brand, and how do they react to your price. In some of categories, the price is not so much sensitive, and people are willing to pay whatever price it is sold. In contrast, many other categories, the customers are easily to switch to competitors if your price is a bit higher. In addition, depending upon the customer segment, there are certain segments, who are really care about the value and benefit of products rather than the price while other segments don’t.
- Know the value of your brand: Brand is adding the value on product/ service. Absolutely, good brand help you to sell product with high price. However, you need to know your brand position in market, how much value it can add to your true product value. There are many failure lessons for big brands who think overconfident towards the brand value and adding too much price gap on top of their product price which make the customer need to think carefully before purchase and switch to competitors. Customer is paying for the benefit which product can bring to them plus because it is “value for money”.
- Know the cost: The most essential thing in setting the price is the company need to know how much total cost is. Cost include production, labour, discount, advertising, cost of selling and administration, etc. Absolutely no one want to sell product without profit, also cannot sell product below the cost.
- Know your competitors: You always need to keep eye closely to your competitors, so that you can adjust your product price base on the movement/ changes of competitors if necessary. In general, base on typical buying process:
Customer generally will research information about product, suppliers, place to purchase, price, promotion, etc for their consideration. Hence, knowing your competitor is a must which help you have enough knowledge to set price correct.
There are mistake when setting the price:
- Don’t know your true value: this is the mistake when you really don’t know what are your key unique selling points, or your strengths, or you might know your strengths but mistake when selecting the key strength to leverage your value up. This way will make you set the price higher or lower the market acceptance level.
- Ignoring the distribution factors: The premium products should be stored at premium place, the mainstream products should be presented at mainstream store. In premium place, any discount / promotion is considered as “good to go”. In the mainstream place, even you give the same discount and promotion, customers will have doubt about the product quality. However, there are many famous brands, they are putting their price same level across all places. This strategy is good to increase brand image, but need to ensure the equivalent quality across all channels.
- Ignoring the branding activity: As said, The brand value is especially important as it can give additional cost on top of your product price. The premium brands can be sold at a low price under the term of promotion. While the unbranded products even with promotion may not bring a big impact.
There are some tips we suggest helping you to set product retail price RIGHT!
- Setting price based on market acceptance: that is how the customers are willing to pay for your products in consideration your product with other alternatives. Don’t set price over the market acceptance.
- Conduct market research and select the suitable pricing methodology: The research could help you to estimate the sales volume and value and addressing the market acceptance level for your decision. Market Research is answering:
- What price the market is willing to pay.
- How your brand and product are perceived by customers.
- What are your competitors charge.
- Whether the product is “highly visible” and frequently shopped and compared.
- The estimated volume of product you can sell.
- How much your competitor charge
- Monitor your competitor’s pricing on time period basis: You should have monitoring the price from all your key competitors on period basis. This will help you to predict their price strategy and build the strategy to response to competitor’s price.
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