There are a number of equally Lsd that work hand-in-hand when launching a product to market. However, I would venture to say that pricing is probably THE most vital component if you want to succeed in marketing your product. If your product isn’t priced correctly, it would be extremely challenging to survive in this competitive marketplace especially in this economy where price is scrutinized more than ever by buyers and consumers.
As a manufacturer, it is critical that you not only understand the marketplace, but you need to understand how to price a product to make sure that your product sells, and most importantly that it’s PROFITABLE. There is nothing worse than getting your products manufactured and placed at retail and then you find out later that you’re actually not making money…or worse yet, you’re losing money!
This typically happens when a manufacturer doesn’t do enough planning or they don’t have a good understanding of all costs associated with launching a product.
I would caution you to be extremely careful and be prepared so you can properly calculate your costs PRIOR to even manufacturing your product. Knowing your expenses will allow you to determine the profit that you need in order to be sure you make money.
In my opinion, you would be better off not producing the product if it turns out that you won’t be making a profit. I know this may sound harsh to some, but let’s be real…you should be in business to make money. Unless you have a ton of money to spend, it would be a waste of time, energy and money.
You may have invented the next great thing but if the numbers don’t make sense, it’s very difficult in my opinion to justify investing in something that isn’t going to give you the return you need to recoup your investment, stay in business and make money. Your long-term goals may be personal, like changing people’s lives with a great product, but your business goal should be about making a profit or else you will be out of business.
I am by no means suggesting that you should give up if this happens. If this is the case, return to your product development stage and work with your manufacturer to figure out if there are ways to cut costs in order to meet your pricing structure requirements. Seek assistance from partners who have the experience and expertise that can help you find possible solutions that will provide you with a successful launch.
So let’s talk about planning first and then in another article, I’ll go over the costs associated with producing or manufacturing a product. I’ll also show you how to actually price a product and calculate margins.
There are a number of things you should be aware of before you price a product to make sure you’re well-positioned to become profitable.
1. Identify your competition. Do as much research as possible in the beginning to identify products similar to yours so you have an idea how to price your product and how to stay competitive.
2. Determine WHERE you want to sell your product and be flexible. Do you want to sell your product to specialty stores, online, catalog, mass or big box chains? Keep in mind that the pricing model that you come up with may dictate the channel. For instance, you may want to sell your product to mass chains but your numbers show that you won’t be able to sell it to them or you won’t make a profit, so you may have to sell it to specialty stores (since specialty stores typically price their products higher than mass chains)…at least in the beginning.