For instance, you have created a product that you are very proud of and want to sell. You may already have your first salesperson ask you: How much does it cost? And you get empty. How to calculate the sale price?
- Because if you ask for less, you lose. And if it is more, the potential client may consider that you have asked too much and do not want to take the product again. If you also think that something like this happens in your e-commerce and that is why you do not sell, then we will give you some tips on how to sell products (and services).
How to find out how much your product costs.
Let’s face it: pricing a product isn’t as simple as providing data. Numerous aspects influence the selling price, and there are numerous methods for determining the appropriate amount for both customers and enterprises. As a result, everyone benefits. But how do you get it?
When calculating the selling price, several factors are taken into account. One of the first, without a doubt, is the Price of this product, i.e., what you will have to spend to make this product. For example, consider the case of a paper book that you want to sell. If you’ve ever visited a printing press, you’ll know that the Price of x books is x euro, which is divided by the number of books to arrive at a figure. That’s what you pay per book, and at least, you should get back per book. Therefore, we say this number is 5 euros.
This means that the sale price of this book is at least 5 Euros. However, if you sell it that way, you won’t make a profit. If you send it, the shipping costs will be on your account, so you will lose money.
That is why other costs are included in the production cost of the product. Are with:
- Packaging and shipping costs.
- The cost of all the hours used to make the product.
- The benefits you want to get.
Now, that doesn’t mean we ask for 50 instead of 5 euros. Through proxies, you can, but will they buy you? Most likely not. Here are the factors that can help you determine the best selling price.
What factors should be considered in determining the selling price?
Here is a formula that can be used to calculate the selling price of a product. It is as follows:
Sale Price = Price * (100/100-Profit)
While, you should keep in mind that other factors affect this formula, which are:
- Competition. You need to set a price that does not make you more or less different from your competitor but also offers something to the client to choose you instead of the competitor.
- Psychological value. When you buy something for 49.95, we know you are spending 50 euros. But many times the impression is given that you have spent less than 50 euros, even if it is 5 cents less.
- Product icon. Think for a second you were transposed into the karmic-driven world of Earl. Would you buy something at that Price? Most likely not. The image and how consumers view your product affect what they are willing to pay for.
- Offer and demand. There is no doubt that it doesn’t matter if the customer wants the product at any price. But if they don’t want it, you have to lower the price to sell it.
What methods can be used to set the Price?
There are two main techniques for calculating a product’s selling price. This does not, however, indicate that you must rely on them because, as we’ve shown, there are other factors to consider.
- Gross profit method. The traditional way to know how much to sell a product. What is done is to determine the percentage of the profit of the product.
- Partnership margin. In other words, the profit you want to make from the sale of this product. That way, you make sure you make a profit, regardless of the cost of the product.
Is more or less selling Price better?
Many people think that prices should be kept as low as possible, to encourage sales and get people to buy more. But you can also confuse yourself with the unpleasant reality: you don’t sell.
Many companies can afford to make a small profit by trying to make a name for themselves. Or for a special promotion. Sometimes, the reason for this cost is that there are more loans because not all expenses are covered. Or, by covering yourself up, you realize you don’t sell.
This is very common, especially in e-commerce. Let’s take an example:
Think for a second you were transposed into the karmic-driven world of Earl. In e-commerce, it costs you 150 euros and another 400 euros. The “normal” Price for this terminal is 350 euros. Now we ask you which choice would you make? You will no doubt buy 150 euros because you think it is a scam, or that they will not send you the phone you want, that it is of poor quality, and so on. In these cases, if you can’t find it for 350 euros, the most common thing is that, if you want it, you spend more instead of reducing it.
And the fact is that sometimes if you lower the price too much, you may find yourself in that situation. What if you asked for 300 instead of 150 euros? Well, since it is close to the retail price, which is the most, in the end, you will choose 300 because it is saved and it is not so low that you doubt it.
The store has a reputation on the sidelines if it has opinions or ratings, etc. (Which may affect the final decision).
In short, what we are trying to convey to you is that, at times, low prices make customers suspicious of your quality. This is because of Products and the company itself. In contrast, a higher will limit the customers a lot (as we said, if you find it cheap and want it, you will pay more for it).
Is it now clear to you how to calculate the selling price of a product or service?