3 Tips for Pricing Your Product
Settling on a price for your products can be an absolute nightmare. Between monitoring competitors to make sure you stay competitive, managing production costs, keeping up with fluctuating prices of materials and — on top of all that — making sure customers will actually purchase your product, it’s easy to feel overwhelmed and unsettled during the process.
Below, we outline some tips from industry experts who have found the pricing sweet spot, both for ecommerce sites and brick-and-mortar shops.
1. Crowdsource Your Price
One of the best ways to find out how much your customers will pay for your product is to ask them directly. Crowdsourcing the price for your product via surveys and user feedback is an easy way to gauge interest and ensure that you’re setting up your business for success. We chatted with Shannon Malone, director of product strategy at Warby Parker about how the company settled on its price point and how it stays competitive.
“We rely on our customers to let us know that they see the value in our pricing,” says Malone. “We survey customers often regarding price and value, among other things. If we notice that customers aren’t as impressed as they once were, we flag it and brainstorm how best to pivot. Value is a price-to-quality ratio, and we always try to provide value to stay competitive.”
Malone adds that the company constantly strives to improve its products’ quality by upgrading materials and utilizing innovative methods of construction, as well as by taking customer feedback and market trends into account. “Our core $95 price point resulted from a market survey. Each time we introduce a new price point, we look to our customers for guidance first (through surveys and focus groups), and then do market research on comparable products,” says Malone.
One easy way to conduct a customer survey is with Google Forms in Google Drive. You can easily set up a survey with as many questions as you like, and you can choose different question formats such as text, multiple choice, checkboxes and more. After you’ve set up your survey, you can share it with customers or focus groups by adding individual email addresses or by posting a link anywhere you’d like — Facebook, Twitter, email newsletter or your company website, for example.
You can choose to have the responses automatically fill into a new spreadsheet for easy analysis, or you can select “summary of responses” to grasp the big picture.
For step-by-step instructions on how to set up a Google Form, check out the video below.
If you have a brick-and-mortar business and you’re introducing new products, don’t be afraid to solicit customer feedback directly from the people shopping in your store. Ask them straightforwardly about pricing, and make the most out of face-to-face interaction — this will not only demonstrate that you care about your customers’ opinions, but you’ll also gain invaluable insight into how to improve your brand.
2. Be Accessible
When you’re pricing out a new product, it’s important to remember that you’re offering a value proposition to prospective buyers: in exchange for a certain amount of money, your customers will receive something of equal (or nearly equal) value. This value proposition can be difficult to communicate — especially for online retailers who can’t present prospective buyers with a physical object to validate the cash they’re forking over. We talked with Of A Kind founder Claire Mazur about her strategies for pricing in the ecommerce space, and how she convinces customers that they’re buying a quality product.
“I talk a lot about ‘gateway drug pricing’ with our products. This basically means that we want to keep pricing accessible so that our customers will keep coming back for more. We sell pieces from emerging fashion designers, and a big part of our brand is the idea that we’re going to introduce you to these designers who you haven’t heard of yet, but will want to keep an eye on,” says Mazur.
“We have to give our audience a price that will allow them to take a little bit of a risk on a piece that they can’t touch [because we’re online-only] from a designer they’re not familiar with,” adds Mazur. “But once they have the piece in their hands and fall in love with it, they’re going to be hooked on that designer and keep coming back for more — and keep climbing up the price point ladder. I try to frame it as a marketing investment in that way.”
3. Fill a Gap in the Market
In order to give your product the best chance at success, fill a price gap in the marketplace unfilled by your competitors. Once you’ve conducted substantial market research, scour the data for a price point that no one is addressing and adjust your business model accordingly. You obviously have to price your product high enough to cover any overhead and production costs — but if you can find wiggle room in your budget and lower the price of your product, even a few dollars might be enough to differentiate your product from the competition.
Baldwin Denim founder and designer Matt Baldwin stays price-competitive by filling a gap in the industry. “I start with what’s missing in the market and produce what I believe will be exciting and meet an unmet need,” says Baldwin. “We perform deep cost analyses, and make decisions that are rooted in historical data and selling patterns in various categories at various price ranges.”
Baldwin also stresses the importance of comparing your products to competitors’ offerings, as well as products in similar categories to see where you stack up in the market. “If [our product price] makes it through that process, we have confidence in its potential to perform. We stay price-competitive by keeping our finger on the pulse of the market. No matter your industry, if you don’t know your market, you’re already irrelevant.”
How does your business price its products? Let us know in the comments.
Image: iStock, MHJ