How to Determine the Selling Price of Your Product
Pricing is important for any business to be able to sell products effectively.
In addition to quality and the scope of services, one thing in particular counts for the buyer: the price. Regardless of whether his budget is tight or he simply wants to save, expensive products often lose out against cheaper alternatives. At the same time you should not and do not want to sell yourself below value. After all, there is a lot of work in each of your products.
So that both you and your customer are satisfied in the end, it depends on the right pricing. In the following, we would like to give you some tips and tricks on how you can use your pricing optimally.
What is behind the pricing policy and pricing?
Every product and every service has a price. It is up to a company to decide for itself what it would like to charge for the products it offers. Especially in the initial phase, a company must therefore consider: How much should my product cost? Pricing policy deals with this question . The pricing policy summarizes all the goals , strategies, plans and measures that a company pursues when pricing its products. The factors of price policy, price management, price planning or price strategy are a building block in a company’s marketing mix . The management of a company determines the pricing strategy and thus the pricing policy, the marketing then deals with the individual prices.
The pricing can have different goals and depends on each entrepreneur personally. First and foremost, however, profitability should always be the top priority. In order for this to be guaranteed, the prices must not only be so high that you go out with a profit, but precisely so that the customer perceives the price as fair and is willing to pay it. After all, no customer likes the feeling of having to pay too much for the product. In addition, the pricing goals also vary according to the size of the company. For start-ups, pricing can be an important tool for attracting new customers. For companies that have been in the market for a long time, the goal of pricing can be to retain customers for the long term.
The different pricing instruments
Whether your pricing works in the marketplace depends on whether customers accept the chosen price. To find the right price here, there are different approaches that we already mentioned in the article about the right pricing strategy . The starting point is always a basic price, which is then varied using various price instruments. Such instruments can be:
- Special offers
- Flat rates
- Price differences, for example due to package sizes
- Additional service
- Leasing or hire purchase
- Price differentiation according to place and time
- Special terms of payment
12 tips for optimal pricing
1. SHIFT THE FOCUS AWAY FROM THE PRICE
We are most willing to spend money on something we actually need. Or to put it more precisely: that we are convinced we need. There is no other way of explaining the prices of every new iPhone model.
So in order for your customers to seriously consider taking money into their hands, you must first convince them of your product . Do not focus your pricing policy on being cheaper than other comparable products. Instead, emphasize the benefit your customers would get from a purchase: Your product helps them solve a problem in the most pleasant and efficient way possible. It stands for a certain attitude towards life that they desire, such as B. the iPhone mentioned above.
In short: Ideally, your product is so good that the price hardly matters.
2. THE ANCHOR EFFECT
The anchor effect stands for the fact that our brain looks for comparison values when trying to measure something. This also applies to prices, which is why you can use this effect in pricing. If we first think of large numbers, even if they have nothing to do with money, we are ready to pay a lot more money afterwards.
For example, in a restaurant called “Studio 97”, diners spent $ 8 more than in a restaurant called “Studio 17”.
3. PRICES ARE A MATTER OF COMPARISON
You have a product that you want to sell for 50 euros and one that costs 90 euros. If you want to sell the more expensive of the two in particular, there is a very effective method for doing this: add another product next to it that costs 130 euros, for example. Suddenly, 90 euros doesn’t look that expensive anymore.
4. BE CAREFUL WITH THE 99
It is a well-known trick in marketing pricing not to give a round sum, but instead to stay just below that. This also uses the anchor effect a little: at a price of € 9.99, the nine before the decimal point stays in the memory.
However, such sums are quickly perceived as deliberately manipulative. Prices like € 9.80 seem more serious. This is also evident in the case of hourly rates: € 112 seems fair, while € 99 looks like you absolutely want to stay just under € 100.
5. DEDUCTIONS ARE BETTER THAN SURCHARGES
People like to save. Much rather than paying an extra charge. You should take this into account when setting your pricing: Instead of calculating a surcharge for additional services, it is better to grant a discount.
Example: Some delivery services offer a discount of 10 percent – 20 percent if you pick up the pizza instead of having it delivered. If they were to offer a cheap pizza instead, but charge a surcharge for delivery, they would hardly be able to stay on the market for long, even if the prices were the same in both cases.
With this trick you ensure that even customers who choose the more expensive option do not secretly get annoyed because they had to pay more. And those who want to save are also satisfied and save you a certain amount of work.
6. STATE THE PRICE PER ITEM
If you want to buy a kilo of strawberries and see that 100 grams only cost 89 cents, you are much more motivated to buy than if you just see the price tag with the price of 8.90 euros. The trick is to put the focus on the small penny amount. So the total also looks lower.
7. THE POWER OF WORDS
Certain words arouse associations in us without our being able to influence them. In the product description, it is good to emphasize that a closet has a lot of storage space. On the other hand, you should avoid all words on the price tag that somehow have to do with “high” or “a lot”. Even if they have nothing to do with the price, they unconsciously let it appear high.
Instead, use descriptions of the product on the price tag that suggest economy: “low consumption”, “low”, “little”.
8. THE DESIGN OF THE PRICE TAG
The price tag is much more than just a tag with a sum. The design largely determines whether your customers are willing to pay or not.
Make sure that the price is as possible in the lower left corner. So it automatically looks lower than if it were to be found in the upper right corner. The reason for this is the way charts read: everything that is at the bottom left of a graph is low. What is right at the top, on the other hand, is a lot.
9. LEAVE OUT THE EURO SYMBOL
If the symbol for the currency is missing, people are more willing to spend more money. If the point that marks thousands digits is also missing, this has the same effect. However, you should be careful and abide by the current legal requirements to avoid problems.
10. OFFER INSTALLMENT PAYMENTS
If you offer more expensive products that cost several hundreds of euros, many customers can be put off at first glance. Here it makes sense to offer your customers installment payments and to place them clearly visible. So if your product costs 400 euros, for example, that is a lot of money for many that they have to raise. However, if you offer an installment of 50 euros in eight installments each, the product suddenly appears to be much more affordable.
11. FIRST PRESENT THE PRODUCT, THEN THE PRICE
One sees this phenomenon very often online with luxury brands: The product is first shown an eternally long presentation, through which the customer has to scroll through until the price is then presented at the end. This is also a good trick that you can use for your online shop . The prerequisite for this, however, is that the presentation of the product is appealing. This means that high-quality photos must be shown, the customer must not be overwhelmed by text, but all the important information must still be available. Ideally, the customer would then already want to buy the product before he has reached the end of the price.
12. JUSTIFY YOUR COSTS
When looking at a product, many customers wonder whether the price, measured against the production costs, is even justified. A legitimate question, after all, the product has to be worth the price. Here you can insert a few words in the description text of the product that give the customer the feeling of buying a very high-quality product. Examples of this would be “organic cultivation”, “handmade” or “Made in Germany”.
Conclusion pricing: Even high prices can look attractive
Nobody really likes to pay a lot of money when there are cheaper alternatives. High prices suggest quality. But they still have to look convincing and not like a usury. Present them in an appealing way and they won’t put off your customers anymore.