Researching industry standards
Research? What should you research to assist with pricing?
- The costs within your business to ensure that you can make a profit;
- The competition / demand for the product
- Your customers - who are they?
You need to consider your costs when it comes to pricing. There are fixed costs, eg. rent, insurances. These were looked at in Week 1 - startup costs and ongoing costs. You also have variable costs, which are what it costs for your product(s). The calculation of the variable cost will depend on whether you are buying your product ready made or your are manufacturing. In calculating this cost you should consider all the materials including import duties and delivery costs.
Understanding “Your Costs” helps with setting “Your Pricing”.
- Who are your competitors?
- How much are they charging for their product?
Research your competitors: look online at their websites to check on pricing, phone for quotes, read advertisements. When researching ensure that the products are the same as you offer. If they are not the same, be sure to distinguish a point of difference for your product. Is your product in a market that is highly competitive or are there only a few competitors? This is important to determine as it can impact your pricing.
If your research reveals that your pricing is a lot higher than your competition you need to then ask yourself: “what is my point of difference?”; “why would they pay more for my product than my competitor’s?”. If you do not have a point of difference, then you may price yourself out of the market. If your price is too low then customers may perceive your product is inferior to the competition.
Customer market research can help identify the needs, wants, expectations and behaviours of customers. Using this information will help you identify where your customers work, look at advertising, what they read, etc. This will give you a profile of your customers’ buying behaviour, which includes your pricing.
Read the article 'When the Price is Just Right: 6 Consumer Research Findings on Product Pricing' to find out more information about the effect pricing has on customer satisfaction and consumer psychology in relation to pricing
How are you going to approach your product or service pricing psychology for your online business?
Share your ideas in the Comments area.
© RMIT University 2017