This is a concept that we must apply in our business, many people ask us "How can I sell such a product? What should be the price to charge? How can I manage my margins? What should my margin be?"
At the moment of starting our business, we have the doubt about what is the price at which I should sell my products? When we do retail, this task " is easier" , because taking into account our cost we establish some margins and market a product, but in the case of a service, such as personalization, this task becomes a little more complicated.
So that you can establish an adequate price for your products, we are going to establish some parameters that are used, and some market strategies that you can apply.
First we will talk about market strategies , when entering a new business. When we are launching a new business we must take into account what positioning we are looking for our brand to have, in this case there are two main strategies to set a price:
- Skim price : This technique works when you are the first to cover a market, where you set a high price , and then reduce it over time. Although this strategy sounds very good, you must bear in mind that the quality and assistance offered (on-time delivery, sales and after-sales service) for your service must justify the price. You must take into account knowing your market , if customers can see the novelty of your product and are willing to pay a higher price.
We can see this strategy applied in the launch of a new electronic product, a very famous case is the launch of the Iphone , this mobile device without a keyboard that allowed us to perform a wide variety of functions at a cost of USD$499 in 2007.
- Launch price : this strategy consists of setting prices lower than the competition to attract an audience and be able to enter the market. But, this strategy is a double-edged alarm, so we invite you to know your market , if you place a very low price in relation to the competition, your sales will increase, but then you could be damaging the market because you force your competitors to adjust to your offers and when you want to establish fairer prices to be able to pay for your business, the market will already have low prices and it could cost you to compete , another reason is that even if you increase your sales, your customers only look for you because of the price and not because have created a real relationship with you or connected with your product.
An example of an introductory price strategy that has worked quite well was the Amazon Kindle Fire , these tablets for personal use, came out to compete with the Ipad with a price of US$199, almost half of its competition, but this did not " harm the market" I just created a new market niche for the personal tablet area, where you can have a reading device (main focus of the Amazon Kindle ) that can compete against the Ipad.
We hope that these strategies have helped you understand more clearly how to enter the market, and what plans you have now that you are starting a new business or launching a new product. In our next entry we will establish the parameters for you to set the sale price according to your positioning.