You are ready to launch a new product or service. You've spent months developing it, and you're finally ready to start selling.

Then comes the age-old question: what should I charge for it? It's a question that every business owner has to answer, and unfortunately it's one of the most difficult to answer. That's because business owners know instinctively that pricing, perhaps more than anything else, has the power to determine whether you sell a million widgets, or none at all.

Here are tips for pricing your product or service and getting it right.

Analyze the competition. While internal factors will inevitably be the deciding factors when you finalize your pricing, you shouldn't ignore the competition. In markets where there are multiple competitors, an analysis of competitor pricing is often a very good way to quickly develop a target range to work off of.

Talk to potential customers. If you haven't already launched your product or service to the world, talking to potential customers about pricing is one of the most effective ways to obtain 'hard numbers' that can assist you as you evaluate possible price points.

Start higher, but not too high. It's almost always easier to lower prices than to raise them. That means that it's generally better to overshoot on your pricing than to undershoot. But don't go too high; once you've priced your product or service way out of the market, it may be difficult to get potential customers to take a second look.

Use discounts as 'feelers'. When trying to find the perfect price point, discounts are often a good tool for testing whether or not you've overshot, and by how much, without committing to a permanent price change.

Play with the packaging. Pricing doesn't exist in a vacuum. For consumers evaluating a product or service, price alone isn't the only consideration. One of the most important considerations: perceived value. Packaging a product or service differently -- or positioning it differently -- can produce significantly different sales results. For this reason, it's important for pricing experiments to involve your packaging and positioning. In some cases, you may discover that you can charge more and increase sales.

Listen to your customers. Customers don't usually hold back when it comes to opinions about pricing. They'll let you know, whether it's "I can't believe this is only $49.95!" or "They must be crazy trying to sell this for $20!" While praise for the value of what you offer isn't necessarily an invitation to raise prices successfully, when a good number of customers and/or potential customers think you're charging too much, it's good reason to rethink your pricing.

Basic economic theory tells us that price is determined by supply and demand. But when it comes right down to it, pricing is often one of the most challenging areas for businesses owners, especially in markets in which there is theoretically no limit on supply (eg. digital content).

At the end of the day, getting pricing right is a bit of art and science. It takes a combination of research and experimentation, and a touch of hedging thrown in.

Photo credit: fireballk2588 via Flickr.

Patricio Robles

Published 8 April, 2010 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (2)


John Paul Aguiar

Great post.  I went thur this when I released my ebook few mnths ago.. I changed the price about 4 times,lol before I ended with what I thought was a good price for me and my customer.

over 8 years ago


Ross Hall

Small observation - but you can't price your product until you know what it costs to produce, distribute, service etc. If you don't have this basic information available then you can do all the competitive analysis you like, you still won't generate a profit if income is less than expenditure!

Of course, having done that you can then look at the price of the competition and work out what to charge customers.

Unfortunately, though, I've seen a few too people in my time who scratch their heads wondering why their business is heading down the tubes when they haven't understood their cost base!

over 8 years ago

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