How you price your products can either make or break your business.  So it’s an understatement to say it’s important.  Coming up with what to charge for your product can sometimes be a challenging task.  It may be that you’ve come up with a unique product.  There may not be a lot of similar products to compare it to.  Maybe it’s just a new product idea, or you’re inexperienced with pricing.  So how do you figure out what to charge? 

There are a number of approaches you can take to accomplish your goal.  Which one you choose greatly depends on the goal you’re trying to reach.  So when you think about it, our real discussion is about goals and what you want to end up with as a result of your product price.

What I will cover in these posts isn’t unique by any stretch of the imagination.  I came across a this summary of product pricing and thought it was pretty good.  I hope to go into more detail over the next several posts on this subject, but it’s a good way to get your feet wet and familiar with the terms.

Before I really dive into the different strategies you can take with your pricing let me say something about costs.  No matter what approach you take with your pricing, the ultimate goal is to have money left over after you pay your bills.  You need to be as acurate as possible when it comes to calculating your costs.  Guesstimating just won’t cut it.  You need to know you’re going to come out on the right end of the stick.

It’s true that in some cases you may have to estimate, but get as close as you can.  Being way high will result in high prices and fewer sales.  Too low and you’re giving away the farm.  So one of your first exerciese needs to be figuring out your costs.  This includes all the costs.  Many people will do a good job of figuring supply costs, but forget to include things like gas for the car, phone bill, fees and things like that.  The fixed costs of the business.

The better your understanding of your costs, the more confident you will be about pricing.