Just how much is your product worth? How much can you make through sales in your business?
I wish there was one simple formula that I could give you. The truth is pricing your product is really hard. There are just so many factors that you need to consider going into it.
The good news is a physical product tends to be easier to price up than a service. Want to know why? Because you have a base line to help you make a profit.
Here are the factors you need to consider to charge for your product.
Consider the Cost to Make the Product in the First Place
As I say, a physical product tends to have a base cost. You need to get back your investment for making it.
Okay, so it’s not just as simple as taking the price for the materials and adding a bit on to come up with a final sale price, but it will start. Add up all the cost of the materials and divide that by the number of products you get out of them. This is the cost price for making the product.
Now Think About the Time You Put In
No matter what you make, there is the element of time. Just how long did it take you to cut up the material, shape it, colour it and everything else you need to do for your product?
Your time is worth money. You want to make sure you recoup the time and make a bare minimum per hour. Remember you’re not going to get the time back with just one sale. This will come through multiple sales and take time to get you to a minimum amount per hour.
Look at Your Competition
While you don’t want to create a race to the bottom, consider what your competition has to offer. This is a great way to judge what people are already willing to pay.
You can’t just create the same product and expect to make the same amount. People are willing to pay more if they trust the brand and had a relationship with the seller. They’ll also likely pay more when they know the seller has experience.
You may need to charge less until you build your brand. Then you can start paying more. Watch out for underpricing, as that will make you look like a poor quality competitor.
If you’ve already built your reputation and brand, you’ll likely be able to get away with charging more or a little extra for your product.
Consider Your Target Market
Who is your product for? What sort of market is it aimed at?
If you target single mothers, you’ll find you need to charge less than targeting rich retirees living abroad with two homes. Single mothers are more likely to have less disposable income, so they won’t be able to spend much on your products even if they want to.
When you’re targeting people who likely have more disposable income, you can price up your products.
Really take a step back and think of your target market. You’ll then need to promote towards this target market, which may be through flyers, social media marketing or even blog content.
Now it’s time to get to the drawing board. How much should you charge for your product? Don’t worry about getting the wrong amount at first. You can always reduce or increase the price over time, just try not to do it too much!