If you want to know how to make money online, it is vital that you understand pricing strategy. The price you charge for your product or service is key to the success of your product in the market place.
Price is one of the four key components of the marketing mix. The others are Product, Promotion and Place which are also covered in this book.
Developing an effective pricing strategy is an essential element in your new business. It is from the price of your product that you receive revenue and it is this revenue against costs that ultimately determines if you have a successful business.
To determine the price of your product you will need to know all the costs. You will need to work out what it will cost you to put your product up for sale from the cost of the goods (usually called cost of goods sold and written as COGS) to the cost of transport to get your goods where they need to go, to warehousing, to packaging to promotion and so on.
At the same time, you will need to know the competition’s prices, understand the market’s perception of the right price and potentially consider a range of price points for your product distribution.
Pricing strategy is something you really need to understand. Get this wrong and you could regret it for a long time. Get it right, and you will be counting your blessings. I could write an entire book about price however, I suggest you do some additional reading. It is a very complex subject with many potential pitfalls for the uninitiated.
There are many good websites devoted to pricing strategy and I would encourage you to read through a couple and devote yourself to understanding the crucial role pricing and pricing strategy plays in your ultimate success. One good example is the Small Business Development Corporation in Australia who have a good amount of information on pricing strategies. But don’t stop there, do as much research as you can to fully understand this vital business strategy.
You will need to be careful if you intend to discount your product or beat the competition based on price. This is not a strategy I generally recommend. A race to the bottom can be devastating for a market and can be ultimately devastating for your product and business too.
Likewise, a cheap product can have a devastating effect on the perception of your brand. Think about products that you buy that are cheap and how that has translated into your perception of that brand.
Also, if you are first to the market with a product it is then also absolutely vital that you get the pricing exactly right because once you dictate the price, it will become a benchmark for other market entrants.
You cannot underestimate the importance of the right product at the right price in the right market.