The Perfect Price Point — Is There Such A Thing?

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The price of your product is almost always a driver of purchasing behavior. Price your product too low, and you may cut into your profit margins or message that your product’s quality is lacking. Price is too high, however, and you lose potential customers and purchases. That is why determining your product’s perfect price point is so critical.

One of the starting points to determine your product’s price point is to conduct market research. Products are typically divided into three price points: high, medium, and low. The higher-end products have higher prices and appeal to consumers who are willing and able to spend more money, while lower-end products cost less but have a larger overall market. Therefore, it would be best to have a solid idea of where your product fits in the current market and which products represent its biggest competition.

After determining where your product fits in the market, you will have to determine the actual product cost. This includes not only the raw material for the product itself but the labor and other overhead costs, including handling and shipping fees. Once you have determined your cost, you can determine what your wholesale and retail prices will be. Your wholesale price will be lower than your retail price to provide a profit margin for retailers who sell your product.

When setting these prices, consider your profit margin, which is typically 30% or above. Retailers may want a profit margin of more than 50%, so keep the retail price in mind as you calculate it. In addition, you may want to provide a “suggested retail price” to help ensure that retailers price your item competitively — though you cannot control the final price that retailers set.

For more information about the factors to consider when pricing your product, check out the accompanying resource.

The Perfect Price Point — Is There Such A Thing?

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