How to Set Right / Best Prices for Products

When setting up your own business, setting the right proices for products being sold can be an issue: too low and there is insifficient revenue; too high and insufficient sales.

Setting up a Business Includes:
How to set up your own business     How to write a business plan     Advantages & disadvantages of own business     How to market your business     How to set the right prices for products     How to set the right contract / consultancy rates     What is professional indemnity insurance    

One of the key issues with any business, new or old is the setting of prices and charges. It could be the unit cost of a product, it could be the supply of services for a complete project, or it could be a day rate or an hour rate for consultancy work.Setting the right price is key because it can have a major impact on the sales of the services and products.

Set the price too low and it can mean that you don't make the return that is required. It can also have the effect of people thinking you are too cheap and therefore the product or service will be poor quality: how can they do a good job for that price. Also, once a price or charge rate has been set for a particular time, then it can be hard to increase it to the required level.

Conversely if the price or rate is set too high, then people may think it is too expensive, or the budget may not be able to cater for it.

All of this means that setting the price or charges at the right level is very important to the success of the business.

However setting the right price or charges is not easy, and I have heard a lot of discussion about what the right rates and charges are for different services - it is something everybody finds difficult.

Setting price for products

When a company manufactures a product of some form, it is necessary to set the price. As with anything, the actual price is very important. Put the price up too much and it will not sell, reduce it too far and there is insufficient revenue from it.

There are many articles written on determining the optimum selling price using demand, revenue and cost equations and graphs.

Whist this can be fine in theory, the data can often be difficult to determine for a small business. This can especially true because the level of marketing and market presence can have a major effect as well.

In reality, the best way to set the price can be to undertake some market research. Look at what similar products are being sold for. make a judgement about the specification of the competitive items and use this to make a suitable adjustment.

If you use another company to sell your product, then you will need to include the percentage required by the seller. This can vary quite considerably, so it can be worth spending some time to select the best seller or outlet and this will be a balance between percentage they require and the sales potential they offer.

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