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Three Tips To Set The Price Point For Your Product Or Service | Entrepreneur

Setting the price point for your product or service is one of the biggest obstacles to success when starting a business. You could have the best offering in the world, but without charging the right amount you will either lose money or lose customers. Either way, you’ll be out of business before you know it.

Here are three tips to understand how to go about finding your place in the market, and charge the correct amount for the best return.

1. Do market research as part of a value-based pricing approach
The easiest place to start is with some low-level market research. This doesn’t mean hiring a market research company (although that’s certainly an option). It’s where you scope out the marketplace yourself and see what other companies are doing. This is all part of value-based pricing, which is identifying the perceived worth of your product or service to the customer. And it should be noted that it’s not about copying or undercutting competitors, but rather finding out what kind of ballpark you will be playing in. And figuring out if you’re even able to play in the first place.

If you find that your proposed pricing is vastly different to everyone else’s, now is the time to identify why. Is your product/service lacking something that the others are all supplying? Or are you offering something that they are not? Can you take advantage of this difference to justify your price and carve a more lucrative niche for yourself? Today, there is a wealth of data ready for you to use to make these decisions– whether it’s your own customer data, or reports and studies in the public domain. Understanding this, and what your competitors are doing, means you’re starting out at an advantage.

As professor of marketing and pricing expert, Mark Bergen, said in a recent interview with Marketing Week, “Companies who don’t understand the value they create for customers are ‘flying blind’ on pricing.’”

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Three Tips To Set The Price Point For Your Product Or Service.

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