VD34: How to Price Your Product – a lesson from Seoul ‘s Namdaenum Market
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Today, I ventured through Seoul’s Namdaenum Market. The market specializes in cheaper-range clothing and accessories. You can find anything your heart desires. The price range in the market is across the spectrum which got me thinking about pricing strategy.
Pricing is a science. Charging too high or too little can scare your customers away. You must set an optimum price for your product to establish credibility and differentiate yourself from your competition.
- Market Research & Positioning: Do not price your product arbitrarily. You need to research how much your competition is charging. You can decide whether or not to match their prices. Additionally, survey how much customers would be willing to pay for your product. Customers are always looking for value whether you are selling a luxury or bargain product. If you plan on selling to the luxury segment, you must justify the cost of the product through the craftsmanship of your garments, for example and your overall branding.
- Choose A pricing technique: There are several pricing techniques you can choose. Value based pricing is most appropriate when you are manufacturing your product from A to Z. Through branding, you can establish a set value for your product. The more sought after your product is, the higher you can charge for it. Cost-plus pricing involves adding a markup percentage to costs based on your expenses. Most businesses add anywhere between 30% to 50% markups to wholesale prices. Now, when buying wholesale, you might encounter suggested retail prices that you should follow especially if other retailers sell similar product.
- Add Up Your Costs: Now before setting your prices, take the time to add up all your expenses. Include all direct costs such as manufacturing costs and fixed costs, such as rent, wages, marketing, shipping, etc… Work out what percentage of your costs the product needs to cover – Need help – check out Etsy’s pricing calculator
You will need to track your sales and test different prices regularly. The market / competition can change, and you might need to shift your prices accordingly. There are a few e-commerce pricing optimization tools that will enable you to test the effectiveness of each price you set.
Check out – Dynamic Pricing Engine and Cortex