For those of you who are engaged in manufacturing or producing goods for sale, pricing a product is indeed an important aspect. There are several things that need to be taken into consideration when determining the price of a product.
All of them are of course interrelated in determining the price of a product to be sold. In determining the price of a product, consider this. When the price of a product is too low, the opportunity for profit will be lost. If the price of a product is too high then the opportunity to get potential customers will be lost. Therefore, you need to make some careful considerations.
5 Things to Consider When Pricing a Product
1. Determine your Production Costs
Your production costs is a good basis to determine the price of your product. So, you must be really careful in calculating how much you spend to create a product.
Add the range of profit that you seek to find the ideal selling price of a product. For example, if you spend 10 thousand rupiah to produce something and you want to get 2 thousand rupiah as profit, then the product should be sold at 12 thousand rupiah.
You also need to remember that the cost of a product is not only the costs that appear in the production process but also the overhead costs or the costs of supporting the production process.
Components of production costs include:
- Total fixed costs (TFC) are costs that must be spent by a company to get all the necessary goods and/ or services for the production
- Total variable costs (TVC) are all costs that change in direct proportion to the quantity produced.
- Calculate the average fixed cost is to calculate the total fixed cost and then divide it by the quantity produced.
- Calculate the average variable cost is by dividing the total variable costs by the quantity produced.
- Calculate the average total cost is by dividing the total cost by the quantity produced.
- Calculate the marginal cost is by calculating the additional production costs to increase the production by one unit.
2. Consider Short-Term Loans to Win Price Competition
Running a business requires a lot of capital because the production costs can be huge. If you need additional business capital but you feel reluctant to borrow from a bank, you can consider. Aspire. Aspire is an online loan provider with the best tenor in accordance with the needs of its customers.
Borrowing money through Aspire online loans does not require any collateral. So, if you are looking for an unsecured loan then Aspire can be the solution.
Aspire is available for business people who need fast funds without collateral. You only need to submit a single application and the team will immediately review and approve the loan.
Aspire also offers digital credit cards for small business owners. There are many advantages to having a digital credit card from Aspire.
One of the advantages is that Aspire offers an interest-free digital credit card for repayment within 60 days. With Aspire, withdrawal is very easy because you can get the funds within 24 hours.
Businesses can borrow funds from 20 million to 500 million rupiah with Aspire so developing your business is never easier. So, you should consider Aspire as your financing option.
3. Consider Your Consumers
In pricing a product, a good company would certainly utilize a variety of tools to measure their consumers’ capabilities. The more you know about your intended customers, you can have a more fitting pricing for your product.
Conducting surveys is often needed to understand the capability of consumers to buy a product. This type of research can help provide an overview on how the pricing should be like for the intended customers.
4. Find out the price from competitors
During the price setting stage, you should not think about profits or how to calculate net or gross profits because they are still far away. The most important thing is to focus on the product you want to produce.
If you can produce the best product that offers more values than competitors, getting a big profit will not be a problem.
You should also note whether your product has added values compared to competing products, such as warranty and after-sales service or other added values for consumers.
5. Determine the income that you want
Everyone running a business certainly wants to earn a certain amount of income. Well, the amount of income can come from generating revenue that can be used not only to cover various kinds of expenses.
The revenue can also generate profits to be used in business development. Many business owners make the mistake to assume the level of income is only determined by price.
Actually, it is not only about price. Sales is also very dependent on targeting and also the right sales strategy to get more consumers.
6. Determine Your Priorities
When running a business, you have to ask yourself this question: where do you want to bring your business. This is a question that can be used as a basis in pricing.
For instance, increasing market share is something that you should not forget. Another thing to remember is that product should be known for its quality and not only for its low price.
After you price your product, then you should constantly monitor the price because it determines the level of profit you can get. After everything is done, then you can start thinking about how to calculate profit and the targets to be achieved in one month. With a clear target to be achieved, your marketing efforts can be more focused.