Tweet

Finding the Perfect Price for your Service or Product

Written by: Lee Lister

Article Overview: OK, you’ve got your service or product you want to sell, but how on earth do you work out what to charge? It’s not easy but we will attempt to give you a formula. We’ll use product as the generic term for what ever it is that you are selling.

Finding the Perfect Price for your Service or Product

OK, you’ve got your service or product you want to sell, but how on earth do you work out what to charge? It’s not easy but we will attempt to give you a formula. We’ll use product as the generic term for what ever it is that you are selling.

The price you can charge is a factor of all of these things:
* What it costs to produce or provide the product.
* The cost of adding future upgrades or enhancements.
* What it costs to sell it, including wages, retail, web or office space.
* The cost of marketing the product and building the brand.
* A reasonable profit for your company – such that it/you want to continue in business.

So far so good, the above is not that difficult to calculate or make an educated guess at. Now comes the difficult part of the equation.

* Perceived value of the item – that is how much people desire the product. If you are in the under 30 years of age market – this is vital. There is a reason that one car or one computer, one MP3 player or one watch is more desirable than others – that is that people perceive the value of one brand to be much higher than another. Why should one pair of sports shoes marketed by a well know sports star be valued more than another? Because money has been spent on branding and people desire it more – to keep in with their peers – or to be better than them.
* The actual demand for an item. There is no doubt that people will always some items such as clothes, such services such as health services as money becomes tight, then these demands change as people put together their own lists of what they want against what they need. Scarcity plays a large part in this as well, hence the rush for plywood and duct tape when the hurricane season is upon us, we know it’s available, but are scared the price will go up as it becomes harder to find. This also works with items such as diamonds – which are expensive because they are relatively scarce.
* The value of the item to the purchaser. This is particularly true with services. If you can provide a service that costs $1,000 but saves the purchaser $10,000 then you have got an attractive service. Similarly if you can do something quickly and cheaply, that the purchase has neither the desire nor skill to do, then you can charge a good price for it. Think of how many busy people pay NOT to have to mow their lawns each week. How many people pay a lawyer, to avoid paying out large expenses etc?
* What your competitors are charging. If you have a similar or slightly better product than all the others, then if you can afford to sell it cheaper – then you are going to make more money in the long run! Just be aware that if you are too cheap then people are wary as to the quality of what you are selling.

So how do you work this all out then? Studying and understanding your market, your potential customers and where your product fits in to all of this.

Good luck.

Related Articles
  It's As Easy As Good, Better, Best!
  How to Handle the Price Objection
  4 Tips to Get a High Price and Earn Money On eBay
  Perceived Value Is In The Eye Of The Beholder
  6 Payment Offers That Sell Like Crazy

Article Tags: computer one, diamonds, duct tape, educated guess, enhancements, generic term, health services, hurricane season, mp3 player, no doubt, office space, peers, plywood, purchaser, retail web, rush, scarcity, sports shoes, sports star, wages



Related Forum Posts
Re: Service Or Product? - I agree with starting a Service-based Business in the economy. Here is what I think is critical: 1. Researching that your Service business has a market. 2. Marketing the Service with as much leverage as possible. 3. Product-izing the Service (aka Package Expert Knowledge). This will only help elevate you as "the" expert in your niche and make you accessible to people in different price points.
Show the Benefits - Offer a free test drive of the Product or Service with a Money Back Guarantee - Take the Risk out. This will help them make the decision but you have to work with them to realize it by explicitly state the benefits they are receiving.
Offer Credit instead - I'm not sure if ChrisH was referring to this but i'll state it more expicitly .. Charge upfront and offer a refund of double the value back in "Credit" towards your Product or Service you have for sale at the end of the event.
Re: How Not To Start A New Business - Well, these guys these guys will not succeed at all. they need to have a way of doing things. First thing first, which market segment are they targeting? Or are they in the same segment the previous magazine was. They also need to understand the trends, currently people read online magazines so they need a website. After that they need to develop the marketing mix, which will guide them in their marketing activities. This marketing mix will be made of 4 Ps, which are Product, Place,Price and Promotion. I will assume the magazine is the product, the first P, The Price is what is the role the price will play in the market, do they want premium price, or do they want to skim the market. The other P, they need to have, is the Place, this will help in having a strategy on where to place their magazines, this includes the websites, malls, newspaper stands etc. The final P they need to develop is the Promotion, this is the advertising , channels, websites, forums, blogs, name it. Once they have done that, they can sit down and wait for money to come but not without superior customer service, otherwise without all this, they are wasting their time and money.
Don't leave your Wallet on the table - Targetzone, Evan has great points on targeting you package. Also I read the revenue model you mentioned and i believe you are leaving a lot of money on the table. Aisde from making just $15/sale of a package you could also be making income from sales generated after the people use the coupon on their second and ongoing visits to the Service/Product company. I've sent you a PM - We can talk more advanced strategies. BTW - I'm a Dollarmakers Member and have taken the Joint Venture BootCamp 101 and highly recommend it if you wish to pursue this idea. PM me privately and we can talk.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

10 Golden rules to survive the Global Crisis

Top 5 Qualities in an Outsourcing Company

What If You Had a 100% Success Rate?

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.