Small Business Pricing: How Much Is Your Product Worth?

Selling products at giveaway prices is no way to build your small business. You may get some immediate sales, but at what price? On the other hand, setting your prices too high and will send potential customers fleeing. How can you know what your product is worth? You need smart pricing strategies that assign real, affordable value to your products. Every industry is different but the basic principles of pricing strategies remain the same.

Review these questions and answers before setting a price on a product.

Q. What is the wholesale value of the product? What did you pay for it?

A. The mark-up price to retail is generally 50 percent. This can vary from 30 percent to 70 percent, or much more.

Q. Is the product exclusive to your company?

A. Exclusive products offered solely by your store or a small market can be priced higher. Since they are more difficult to find, your product may have a higher value of 10 to 40 percent.

Q. Does the product require continued maintenance or customer service?

A. If your product requires customer service greater than a quick phone call to the store, then you need to figure this cost into the price. Technical products like software or specialty tools will require knowledgeable support. You have to pass costs on to your consumer.

Q. Will you be shipping the product?

A. Shipping and handling costs will raise the price of your product. Be aware of how much shipping will cost before assigning a price. Also, specialty packaging may chip into your price, so choose packaging wisely.

Market Sampling

There are a few good ways to gauge what your prices should be. One is to get a market sample analysis. Marketing companies offer your products to various groups. They collect the data to determine what value the consumer may potentially place on your product. You could also independently sample the market by doing research of your own in a select market.

View your competitor's prices. Look at similar products and price yours slightly above or below their price. Be careful about pricing products against competitors. You do not want to get into a price war, which could cost you more in the end.

Product Quality

To get the best price, you need the best product. Pay attention to customer complaints and make whatever changes necessary to keep your product in the market at a lucrative price. The smartest, most cutting edge product is worth nothing if it can't do all it promises. Make product quality a priority to get maximum profits.