How to Price Your Product
Tailor Train is a business procurement and business transformation service that has been helping businesses of all sizes and industry improve the way they operate and increase profits.
In business, one of the first things you need to decide before you begin operations is- the price that you are going to sell your product or service at.
But how do you calculate the price of your product? Tailor Train your business procurement consultants are here to give you help and advice when it comes to pricing strategies.
Know Your Chosen Market
The first thing you need to do when it comes to pricing your product is find out how much customers will pay, as well as how much competitors charge.
You can then decide whether to match or beat them. Simply matching a price is dangerous, though – you need to be sure all your costs – both direct and indirect – are covered.
Choose an Effective Pricing Technique
Cost-plus pricing involves adding a mark-up percentage to costs. This will entirely depend on products, businesses and sectors, there is no one size fits all approach to pricing.
Value-based pricing is determined by how much value your customers attach to your product or service. Decide which approach is most suitable for your products before making a calculation and use your customers to value your product.
Take it from a business procurement expert such as Tailor Train, there are several different techniques that can be adopted when it comes to pricing.
Work out Your Costs/Expenses
When working out a pricing strategy, you need to factor in all of the expenses and costs that your company currently faces.
This included investment spent developing a product or service. Then calculate your variable costs (for materials, packaging and so on); the more you make or sell, the higher these will be.
Work out what percentage of your fixed costs the product needs to cover. Add all of these costs together and divide by volume to produce a unit break-even figure.
Cost Plus Pricing
You will need to add a margin or mark-up to your break-even point in order to make a profit. This is usually expressed as a percentage on top of costs and break-even. Industry norms, experience or market knowledge will help you decide the level of mark-up.
If the price looks far too high, trim your costs and reduce the price accordingly. Be aware of the limitations of cost-plus pricing, because it works on the assumption you will sell all units. If you don’t, your profit is lower.
When it comes to business procurement, it is important that after you cover your expenses you add a standard mark up in the form of a percentage or fixed rate.
Speak to Your Business Procurement Specialists Today
If you want to make sure that you are getting the right price for your product, speak to your business procurement specialists today.
Tailor Train have been working with businesses of all size and background for a number of years now and can help you improve the way your business operates. Call us today for a free and friendly chat.