There are a number of factors that customers consider when deciding to purchase a product. In addition to your product’s features and benefits, the customer may consider factors such as your business’ reputation and whether you offer hassle-free returns or free shipping— if the item is being ordered online. But the final hurdle of getting a purchase will always be about price.
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. You should have a solid idea of where your product fits in the current market and which products represent its biggest competition.
After the market research, you must set a market price. 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. 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.
Assuming that the suggested retail prices provide enough of a profit margin for retailers, it is likely that retailers will use that price going forward. If you sell directly to consumers, you will also want to determine what your profit margin is for those sales. For more information about the factors to consider when pricing your product, check out the accompanying resource.