The pricing of your products might mean the success of your business… or its failure. It is no secret that proper pricing is one of the keys to the success of your business and that even the slightest improvement in your pricing can result in a faster sale, more positive response and exposure, and of course, a significant boost in your profit.
Luckily, you do not need to invest in a marketing course to learn how proper pricing works; just having an understanding of the basic concepts of Economics and knowing some helpful tips will do the trick.
Understanding Supply and Demand
Supply and Demand are the most basic concepts in Economics. On one hand, demand is basically the how badly the customer base wants a particular product or service, or how much they are willing to spend on. Supply, on the other hand, is the quantity of products or services offered in the market. Opportunity cost is also an important concept, and it refers to the alternatives one passes up to spend your money on a certain good.
According to the law of demand, given that all other factors are equal, the higher the price of a particular good, the lower the demand is for that good. This is because the higher the price, the higher the opportunity cost is in buying a good.
The supply-price relationship is quite the opposite, for as the law of supply states, the higher the price of a good is, the more supplies of it are produced. The reason behind this is that producers are more willing to produce more of something with a high price to get more profit.
Factors to Consider in Pricing
There are things that you must consider before you decide on a price for your online course:
- Your cost - The cost refers to your budget in making a particular product, and you need to consider this to make sure you make a profit out of selling your products rather than just breaking even or worse, losing money. Note as well that cost covers not only the cost of the product itself but also the other things that you have to spend for such as operating expenses, your employees’ salaries, and other miscellaneous expenses.
- Your Competition - By “knowing the other competitors”, it is not just comparing the published prices of their products to yours. Ask yourself: what sets your product apart from theirs? Are there additional values to your products that can justify a higher price compared to the others? Naturally, it is important to be as impartial as possible in evaluating these in order for the step to be helpful.
- Your company/product image - The way that people perceive your company and/or product will surely affect your sales, so it is important to put this in consideration as well. Obviously, if your product or company has a cheap image, less people will invest serious money in your product, and pricing too high is going to price you out of the market. On the other hand, having a premium image is often grounds for pricing higher.
Many companies make the mistake of under-pricing their products, thinking that it will attract more buyers for being the cheaper alternative. What you should know is that this also brings about a problem for your company and product, for you might get the image of being just "cheap". Because people would want to get their money’s worth, having the image of being the “cheapest alternative” can also be detrimental.
Looking back at the law of demand, the higher the price is of a certain good, the lesser the demand will be for that good. If there is nothing that justifies your product’s having a higher price, then it is most likely that your sales will decrease.
Knowing When to Lower or Raise Prices
Of course, you may not get your pricing right the first time. You may want to try testing different prices, and try out different offers or bonuses regularly. Record and measure the differences in sales and the responses of your customers to see what works best.
Other than that, prices can fluctuate and must adapt to the ever-changing marketplace that your product resides in. Marketplace variables include inflation, interest rates, politics, government policies, advertising, trends/fads, and so on.
While under-pricing is not always a good idea, you can tell if and when to lower your prices by looking at the prices of your competition and looking at the present state of the economy. If, for example, most of your competition decides to discount their products, it is most likely a good idea to lower your own product’s price as well.
Monitoring Your Product Prices
Because change is constant in the economy and advertising, prices must be regularly monitored and adjusted accordingly. Aside from having a budget plan, remember to inspect your prices, making sure that they keep up with the changes. Use this as a way to maximize sales and profit. Proper pricing is a skill that takes time to feel out, but is definitely worth learning. It is something that all aspiring entrepreneurs must aim to master to ensure the success of their businesses.
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