6 Steps To Pricing Your Product Right

price is right

Note: This article was originally published on OPEN Forum.

You might be selling the most spectacular product in the world — but price it wrong, and you could still go broke.

Too high, and you’ll scare off potential customers. Too low, and you’ll hurt your profitability.

Setting the right price is a complex task, involving everything from production costs to the budget of your key demographic. According to Pam Newman, president of RPPC, a Kansas City, Mo., small business accounting firm, the key is to not shoot from the hip.

“Your pricing strategy should be part of an overall business-planning process,” she says.

To do it right, consider the following steps.

Click here to see the keys to pricing your product right >

Understand your costs

That includes both direct expenses--i.e., what you pay for raw materials--and overhead, such as insurance and rent.

With that information, you can then determine whether you'll be able to cover your costs and generate a profit by charging specific prices.

Investigate the competition

Understand who your customer is

That means conducting thorough market research, either by hiring a specialist or doing surveys on your own.

In either case, your goal is to get a detailed view of who your customers are and just how much they can spend.

Rejigger costs

Frequently review your pricing strategy

Slash your prices at your own peril

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