What should I consider when pricing my product?
I know that I need to at least make back what it costs to make, but how do I know how big of a markup I should take? Will it be different if I sell my books on my website vs in a store like Amazon or Barnes n Noble?
You need to consider all the costs that do towards making your product. Don't forget that's not just the cost of the raw materials but also any consumables like electricity, rent, etc which should be apportioned across all products as a fractional cost. You then need to consider what you should pay yourself. This is more difficult but, if you can't make enough money to live on why are you doing it in the first place? The other key consideration is the market. What is the going rate for what you sell? If you are selling something that can be purchased elsewhere you will have to be competitive or people may choose a cheaper alternative. If, however, you are selling something unique and desirable you may be able to charge a premium. Don't forget that you can always change your prices later (although its easier to reduce a higher price than raise a lower one). With regards to marketplaces like Amazon they will undoubtedly charge you a commission. You would need to speak to them about what that is. This is also true is you want to sell in a retail store (commissions here can be anything between 25% and 50% of the selling price). If selling in stores you could look to differentiate your pricing. E.g. a store in an affluent area may be able to charge a premium for products. If you already have a website you need to look at the overheads of running it versus selling through a marketplace. You have to spend time creating and updating content, marketing and fulfilling orders. With a marketplace it depends whether you just sell your products to them and they do the rest or you still have to fulfil orders. And don't forget returns!
The only answer is the market price! At what price point are your customers ready to buy? So you have to know your customers inside out as well as your competition. Then pricing is also an element of your positioning! I hope this helps.
Check out the competitor price ,than wrote a few line in which explain the advantage of your book compare with your competitor ,and than tell them it is great news to get my book with low price with more and effective staff to read
Pricing is dependent on what you are selling. If you are talking about a book, what are other books going for with the same number of pages and in the same format, hard cover or paperback. Amazon and B&N take a percentage of your book however they also offer you a larger audience. If your book is digital that is a great place to offer it as so many people look to buying digital versions of books on those sites.
I offer mine on both Amazon and my own website. You can certainly do both but will incur a bit more of costs because of shipping on your website. Offering on both sites can be a bonus. You will get some nice perks to offer on Amazon especially if you are producing a digital copy but you can offer discounts on your own site periodically if you want to market them for special events etc.. You may get all types of answers about what to price your book, but I recommend you look at ebook versions for the best profit.
Consider the perceived value of your product. Do your potential customers perceive it as a high or low valuable product? Price your product and after some feedback from your customers and potential customers you'll have a better understanding of the right price.
When you sell direct to the end user you will get the best margins. (through your website).
When you sell Amazon you will give Amazon wholesale pricing. Most retailers require a 60% Margin of whatever the suggested retail price is. (ex: $10.00 retail means Amazon buys from you at wholesale $4.00)
Sweet spot retails are usually validated through testing pricepoints. Before you sell to the big retailers make sure you've done your homework on what the consumer is willing to pay at retail for similiar products. At this point its not about your cost of goods and making margin it's about finding the sweetspot retail. Volume drives down your COGS and until you have volume alot of times you will accept less margin. There you go! :)
Look at the competition, Caitlin. Consider what others in your area are charging. You don't want to be the most expensive, but not the least either. Your pricing should reflect the quality and value of your product or service.
Also important, make sure your pricing allows you to make back your costs and then some, for profit, if that's what you're seeking to do.
Best of luck!
i thing the best way for pricing product
the similarity to other product on the market which depend on the marketing research and the quality and the cost of your product
There are so many books out there that are the same as others. What differentiates your form others? Christine was spot on. I remember when I first started selling equipment on Ebay. I did research on shipping but mot nationally. I sold a piece of equipment only thinking of its size and weight. When I went to ship it I was shocked as to how much it actually cost me. My profit went with it. I immediately pulled my items did research and re-posted the items.
I also sold a piece that was shipped then the customer who decided it didn't fit his needs and wanted to return it. This is part of selling on line. My mark up is pretty high, but time preparing pictures, descriptions, and packing and shipping takes a good amount of time. You are selling books which wont be as bad. Look at their mark up also look at Selling as an EBook. Best f luck. I am currently finishing my book and have many more on the works. I will definitely watch the comments as they come through.
As much as possible. At least three to four times what it costs you to make and run your business. Keep in mind that if your books are saving me money via your knowledge, I don't have a problem paying more.
This question also applies to services.
Consider the quality of your work, the price of competition, and what people are willing to pay for it.
Generally speaking, most our clients see the customer purchase their products on Amazon (or something similar) versus their own site. Depending on your sales channel strategy, whether you want your site to be informational only versus e-commerce will determine your pricing strategy.
This is one of those things that you might want to consider farming out to a professional as it can be tricky. You have to calculate what your expenses are & divide them into fixed costs and variable costs. Fixed costs (i.e. rent) cost the same if you sell 1 or 100 units. Variable costs will change w/number of units sold (i.e. printing costs). Then you have to figure out the cost per unit for worst case, best case and likely in order to figure out your break even point. Anything up above that is your profit margin. As many are saying you should try to increase as high as you can, but you have to be realistic . If you are unknown author they aren't going to pay as much as they would for are more well known author. If you have a full time job and this is just part time, consider the lower end of the spectrum until you get established.
The economic realities existing in the country of origin or home country definitely determines what price you give or tag on your product or commodity. If the economic conditions are favorable, no doubt of your satisfactory returns of benefits. But in the event of a harsh economic climate, you stand to make a loss or fail to make any gain
I am inclined to go along with Robert's well-worded and comprehensive answer. I would add, however, that if you wish to increase your prices and still win consumers away from competitors, you will have to invest a bit of extra time, energy, creativity and money to find and describe (in your promotion, advertising and the like) the benefits and value propositions that differentiate your product from is perceived peers and make it worth the additional price. A differentiation strategy becomes especially in a very competitive market for a good or service that has become "commoditized" through too much time selling almost exclusively on the basis of price. Good luck to you!
A couple of points:
Before thinking price, think VALUE, that is, the value you will impart to the reader. The higher the value, the higher the price.
Secondly, understand the psychological link between price and value. In the absence of any other guiding point, we humans think link the this: "it's cheap so it cannot be any good" or "it's expensive so it must be quality".
Thirdly, it's easier to reduce a price than it is to raise it.
All that said I would set a high price and think about some time dated promotional charter offer.
This is a difficult one in to-day's market and depends how "unique" your product in terms of others who create a similar one. If you hold a Patent or Copyright that does help you alot as it means that people who have to buy a license from you to make it. As Robert says, you have to contend with market pressure, particularly given the current market where everyone is trying to undercut the other. As Robert says, your ideal should be 3-4 or better of production cost bearing in mind on the size of the production operation. That would include: Cost of raw materials, workshop costs, including heating lighting and supply for machinery, staffing costs (NB National Insurance in the UK) Commercial Rates, and compliance with health and safety. There are also issues relating to plant and machinery, all of which have to be factored in to the end sale product togeher with a marging. The samller the margin the more quickly you have to produce and sell the product as both the cost of storage in terms of a made up product sitting on a shelf and not bringing in an income, together with the cost of the warehouse space whilst awaiting order and then logisitcs of delivery. The smaller the margin the greater risk you have. Bear in mind if it is a brand new product then you have a greater expense involved in advertising it from the ground, so you run in to other issues. There is no absolute answer other than actullay costing it out on a line by line bases. I woud suggest that it whatever it costs to make plus man time, taxation, rental and then your profit marging. In short you cannot make a blanket figure as Robert suggests. Not to say he is wrong but it does mean you have cost the whole item yourself, and bear in mind competition.
It depends on your product and your market. Some markets experience high percentage margins whilst others experience ridiculously low margins. This is dependant on supply and demand, competition, and the cost of the product itself.
As a rule if you're selling physical products (I'm not sure if you are or not) you will be more expensively priced on Amazon eBay and such channels compared to your own website. Purely due to the increased costs of trading on those channels.
The best strategy is to woo customers from other channels back to your website where you have lower operating costs (in theory). However the best way to get started is with the already established sales channels. They have huge footfall and search engine presence, which can only help you.
Individual pricing strategy comes down to your market and your position within it. If you're providing a premium service you can charge more, even if your product isn't any better than anyone elses. If you're in a saturated market full of competition then your pricing is likely to be lower margin if you want to compete on price - but you'd be better advised to compete on a better service, or USP.
Hi! The answer is it depends. You definitely need to take into account the cost. Further, ask yourself questions: Is your product different from your competition's offerings? If so, how different is it? If your product is unique and hard to replicate, I would price it higher than competition. If not, your product is not very unique, than you have to be mindful of that. In this case you probably will not have a huge margin. You also need to take into account who is your target market and their potential willingness to pay. Finally, keep in mind that higher price conveys prestige while lower price conveys value which brings us back to your target market. On a last note, I like to consider what it takes for me to continue my operation and I factor it into my pricing. I hope this helps. I know it is not a straightforward formula but without more information, this is all that I can offer.
As some suggest: keep your price higher initially. This is true a lot of times BUT it tends to be more true for a product category rather than A product.
Hi Caitlin, Robert's answer is good if you're producing a physical product. However, it sounds like you're selling an information product so that advice doesn't work.
With an information product, the value is in your knowledge and expertise. You need to emphasize the value you deliver. How you do that is to dig deeply into the RESULTS the buyer can expect to enjoy after they've experienced your product. It needs to be clear and measurable. So saying something like "buyers have saved 70% using my method" instead of saying that people were 'happier' or 'felt more centered'.
People pay more to make money, save money, or to save time. They'll also pay for something that makes them feel healthier and have better relationships. More for the first three, than the latter two.
Write down all of the benefits and end-result take aways people can get from all aspects of your product. Then start putting some tangible numbers on them. For example, if it's a business book and you know that your advice has helped your existing clients get at least 5 new clients; and each of those new clients were worth at least $5000 in new sales - than you helped those clients earn $25,000 directly by using your advise. That's a huge value!
Load your product description with results like that and you can charge a significant amount.
Another factor to consider is the investment level of your target market. If they're wealthy CEOs, they'll be able to afford a product that's far more expensive than if your target are people who have been out of work for a year.
Ideally, you need to address the 'Who' question before you create your product. Nothing is more frustrating than creating the ideal product for people who need it but cannot afford to pay for it. After all, this is business and it doesn't work if you don't make a profit.
It's also important to look at similar products for similar target markets. Compare prices and the end-result benefits. If you can make the case that your product can deliver better outcomes, charge more.
Be ware that charging a significantly lower price thinking to undercut the competition is a bad idea. A product that's priced too low conveys the message that it's not worth much. Test it in different markets.