At the start of their activity, business creators are faced with the following questions: at what price to sell my product or service? What price would be reasonable? Pricing shouldn’t be just a matter of intuition. Rather, it should be based on a precise calculation in which you will determine the ideal price for your offer from different factors.
Ideally, the price calculation should be done before product development is complete or before you offer your service. In order to determine early on whether your offer as you present it is competitive in the market, you should calculate the price at the design stage of the business plan.
Calculate the selling price: step by step
Several factors play a role in calculating the price. In addition to acquisition and manufacturing costs, the market and competition situation is also decisive. What are competing companies asking for and what price are customers willing to pay? In case of Ebay sales, you can make use of the ebay fee calculator there.
Step 1: target group analysis
First, take care of those who will pay the price calculated at the end of the chain: the potential customers. The market analysis provides the right tools here. As part of a market study, you analyze who your product is aimed at exactly and highlight the characteristics of this group: information such as sex, age, marital status, but also income, profession and education level as well as interests and wishes describe your target group. These characteristics will allow you to estimate how much potential buyers have for your product and how much they are likely to pay.
This analysis is usually followed by a survey; potential buyers are asked about the new product: do they have an interest in the product? And if so, why? It is also possible to indicate a potential price and ask the participants if they consider it suitable. The justifications provided by the participants are very interesting here. The information obtained will allow you to establish a price range in which your price must then fall. The extent of the investigation will depend on the means at your disposal. For example, a large number of entrepreneurs and SMEs do not have the means to carry out a large-scale survey. But it only takes 10 to 20 well-selected participants to already obtain relevant information.
Step 2: competitive analysis
Once you know what your potential customers are theoretically willing to pay for your new product, it is now time to gather competitive information and analyze it. No one will offer the exact same product or service as you, or you wouldn’t have to market your idea. However, you will find providers whose products or services are of a very similar nature to yours. What are these providers asking for their range? It is also interesting to consider their value for money. In this context, the product itself is not the only one to play a role. Additional services, such as a hotline, also weigh in the balance.
When analyzing the competition, you can also check whether the price range defined in the target group survey is realistic. Since you and your competitors are addressing the same customer base, their ranges should also be of the same order.