How did you decide the pricing for your product?
Henry Walker
7 replies
Replies
Judy Mitchell@ju_mitchell88
When deciding the pricing for my product, we conducted thorough market research to understand the value it provides and how it compares to similar offerings. We also considered factors like production costs, target audience affordability, and the perceived worth of the product.
Share
@ju_mitchell88 thanks Judy that’s useful to know. Did you change the price at all after launch, or do you feel that you got it right first time?
I put it as free at first for a month to get in touch with how much it costs me (acquisition, product development, servers...)
Then I divide all of this by the number of current users and multiply this number by 3 :)
In addition to taking variable and fixed costs into account, in short, the best method that exists is to understand how much value you add to the market and how much do you think people can pay for that value that you are giving them.
@marcosd_followr I like this approach, thanks.
I’d be keen to learn about some real world examples of how this has been done.
@henwalkco A company (Lets say... Apple) develops high-end VR/AR goggles with advanced features.
They consider variable costs like manufacturing, marketing, distribution, and customer support. Let's say all this equals to $500 per goggle.
They also analyze fixed costs such as research and development expenses, overhead costs, and personnel costs. Let's say all this equals to $500 more per goggle.
up to now the price of the goggle should be $1000 (500+500)
After conducting market research and gathering customer feedback, they determine that their VR/AR goggle offer unique value and are the latests developed tech in the world. They price the headphones at a premium to cover their costs and earn more than 100% on each google. They price it at $3500
Everything over $1000 is profit for them but they know their product is unique, they have the branding and the recognition of making quality products so they choose to have a $2500 profit on every product.
Having recognition (Big and successful companies have it) for what you do can give you the leverage to increase your profit margin to desired levels. However, for small companies without established recognition, it's important to focus on covering costs and making a reasonable profit without being overly ambitious. Keep in mind that people are willing to pay a premium for products that have a strong reputation and recognition. When setting the price of your product, consider it as a journey of baby steps, gradually building recognition and value in the market to ultimately achieve higher profitability.