| Q: My partner and I are having a hard time | | | | products sold by competitors. Are the features |
| coming up with what we feel is the perfect price | | | | and benefits similar to your product's? If so, use |
| for our new product. We know what competing | | | | the price of the competing product as a possible |
| products sell for, but we don't know if it's better | | | | price point for your product. If your product is |
| to price our product cheaper than theirs or charge | | | | superior in quality, features and benefits, then you |
| more based on what we think is a superior | | | | might be able to justify a higher price and still be |
| product. What is the best way to determine the | | | | competitive. If your product is inferior, then your |
| perfect price and what is the rule of thumb for | | | | price point will be less.The second way to establish |
| raising prices later on? | | | | pricing is to calculate the total cost to produce and |
| -- Jennifer L.A: Like the perfect man, the perfect | | | | deliver your product, then figure in an acceptable |
| plan, and the perfect murder (not sure what | | | | margin of profit to calculate the final price.The |
| those three have in common, but there is a link | | | | third way to establish a price it to use what I call |
| there somewhere), there is no such thing as the | | | | "The David Copperfield Method." Named after the |
| perfect price. There is that mythical price that | | | | famous magician who made the Statue of Liberty |
| gives the customer excellent bang for his buck | | | | disappear on national TV, this method of pricing |
| and the company excellent profits for its efforts, | | | | simply means that you pull the price out of thin |
| but even that price point can't be considered the | | | | air. Believe it or not, this is the method that many |
| perfect price. That's called compromise, not | | | | companies use to establish pricing. It's also the |
| perfection.Pricing is an important aspect of every | | | | reason many companies disappear.It's easier to |
| business because price is used to create financial | | | | understand the allure of the Copperfield Method |
| projections, establish a break even point, and | | | | when you realize that more often than not, |
| calculate profit and loss.It's also important to | | | | product pricing comes down to one thing: |
| establish a good price point from the beginning | | | | perception.Perception, or as it is more commonly |
| because it is much easier to lower prices than to | | | | referred to in business, perceived value, is one |
| raise them. If you introduce a product at $100 | | | | factor that most entrepreneurs use to determine |
| and make no sales, you can easily lower the price | | | | product pricing. As entrepreneurs, our products |
| to $75 without attracting much attention. | | | | are our children. We create them, we nurture |
| However, if you introduce the product at $75 and | | | | them, we grow them and we love them. And |
| it proves popular and you raise the price to $100, | | | | often we perceive their value to be much greater |
| you may face irate customers and even be | | | | than the market perceives it to be.It's all about |
| accused of price gouging. So it's better to start | | | | the perception of value. What makes a $10,000 |
| high and adjust down, if need be.There really is no | | | | Rolex watch more valuable than a $10 Timex? |
| rule of thumb when it comes to raising prices. | | | | Functionally both are watches and both perform |
| Price is never set in stone and consumers expect | | | | the exact same function: they tell time. Why then |
| prices to change with the times. You might raise | | | | does one sell for a thousand times more than the |
| prices to cover an increase in the cost of | | | | other? Perceived value, nothing more.An |
| manufacturing and other production costs, or in | | | | expensive wristwatch can not make you better |
| response to market demand (the greater the | | | | looking, smarter, healthier, or more popular with |
| demand, the higher the price).You can also justify | | | | the opposite sex. But the perception is that if you |
| a price increase when you improve a product's | | | | have a Rolex on your arm you must have |
| quality, features and benefits. The buying public is | | | | something going for you that the wearer of a $10 |
| generally price conscious, but if you can show that | | | | Timex does not.By the way, does anybody have |
| the value of your product has increased by the | | | | the time? My Timex seems to have |
| addition of new features and benefits, then the | | | | stopped...Here's to your success!Tim KnoxSmall |
| public will usually not balk at an increase in price. | | | | Business Q&A is written by veteran entrepreneur |
| Keep in mind that price increases should be done | | | | and syndicated columnist, Tim Knox. Tim serves |
| in small increments over time, not by significant | | | | as the president and CEO of three successful |
| amounts over night.Though price may be | | | | technology companies and is the founder of |
| determined by any number of factors, basically | | | | DropshipWholesale.net, an online organization |
| there are three ways to establish the price for | | | | dedicated to the success of online and eBay |
| your product.The first way to determine price is | | | | entrepreneurs. |
| to perform a comparative analysis on similar | | | | |