Pricing has always been an integral part of every business. Pricing the product has a lot of impact over smooth working of the business and its growth. In order to achieve satisfactory profits and at the same time set an affordable price for the customer, without compromising on quality of product, effective pricing is necessary.
Also, it is essential to understand the strategy of pricing your product and adjust that according to your position in the market. If you are getting perplexed reading all this, then don’t!
We are here to give you the best proven steps of pricing your home business product. So here we go!
First things first,
Price= Cost + Profit
Now, your cost can be attributed to 3 different things:
1. Cost of Raw Materials which is a Direct Cost.
Direct cost is the cost that can be directly attributed to your product.
For example, if you are selling homemade candles, you would need wax, wicks, fragrance oils etc. So, the ‘cost’ of making one candle is determined by the amount spent on the materials required to produce one candle.
2. Labor Cost which is again a Direct Cost.
This would consider how you value your time in terms of money that you will spend in making these products. Besides, you may even hire an assistant to help you on job work basis or on a fixed pay.
3. Overheads or Indirect Costs:
Overheads are incurred on an ongoing basis while operating a business.
These costs could be the cost of advertising, transport, rent if you choose to participate in a flea market, etc. These activities help you to support and grow your business but do not contribute to the revenue directly.
The sum of these three costs is the minimum price that you should charge to break even.
Now, when we talk about the maximum price, it could be anything based on how you wish to position yourself. Here are a few things that we recommend you to remember when you price your product:
– Initially, avoid selling higher than at a price at which your competitor sells. You could be an exception to this if you are trying to create a luxurious proposition or advertise to be using the best quality raw materials.
– Do not keep the price very low to attract customers. There is a chance that they relate cheaper price to inferior quality.
– Study the purchasing capacity of your potential customers.
This was just about pricing! If you want to know more, keep following Skill2Gether.in, a platform that lets you list your products, services and training. We also offer free consultation to help you overcome any hurdles during your journey of setting up a home business. As an added benefit, you also get to meet like minded people who further motivate you to do better!
Skill2Gether.in free consultation is just a call on 7722015566 or an email to firstname.lastname@example.org away!