Oh what a beautiful challenge!
Pricing a product or service is a crucial step in ensuring the profitability of your business. If your prices are wrong, I can tell you (without kidding) that you won't be able to get very far.
Although it is a complex challenge that requires a thorough analysis of several factors, it is entirely possible to do it yourself with the right tools and information, efficiently and cost-effectively.
What do we calculate?
The first step is to understand the costs associated with producing or providing your services.
It is important to consider direct costs such as raw materials, labor and production costs, not to mention indirect costs such as overheads and expenses related to the smooth running of your business.
For example, for a candle business, direct costs would be: wax, fragrances, wicks, pots, etc.
So basically, everything that is directly related to your product and the tools you need to produce it., INCLUDING YOUR TIME!!!!!! Yes, yes, you know what we never want to add because we are afraid of being too expensive and because our feeling of imposter is too strong. I announce to you that it is today that it stops!
Indirect costs are what is related to your business in general, also called administrative costs. That is to say, your website, your marketing, your advertising, etc.
It will be really important that you think of everything, everything, everything.
The more specific it is, the more fair the prices will be!
By the way, I offer training on the subject and you can access it right here
Mini-Training - Calculating the cost of selling a product | La Vulgarisatrice inc.
Analyze your market
Analyzing your market is essential to determine the price of your products or services. It is crucial to understand the market demand, existing competition, industry trends and your customers' perception of this type of product. This will allow you to evaluate the position of your product or service in the market and set a fair price.
Also consider that just because another company sells the same product at X price doesn't mean you have to do the same.
Did this person do the math correctly? Did they forget something? Are they really making a profit? Is their business viable?
Relying on other people's prices is not necessarily always a good idea... Relying on mathematics is!
Perceived value
Customer perceived value is a key factor in calculating pricing. It is important to understand how customers perceive the value of your product or service compared to alternatives available in the market.
If the price is too low, the customer might think that the quality is lower. In plain English, cheap ! He won't take the time to see more, he'll simply leave your page, never to return.
You can conduct one or more market studies to gain valuable insights into the value perceived by your potential customers.
The pricing strategy
Once you have a clear vision of costs, market and perceived value, you need to establish these prices. There are several ways to do this and these techniques will depend on your type of product and/or the services you offer.
So you can calculate your prices based on costs, based on value or based on the salary you want to make per year.
No matter which method you choose, you can always go back, redo your calculations, adjust and evaluate the result . Also note that the market can change quickly and it is always good to review our methods, and this, for each sphere of your business!
In short, don't go " at random " or " because someone else is doing it too ".
It's YOUR business, with YOUR prices, YOUR value, YOUR time, not someone else's!
