Is Your Price Point Too Low?
I don’t know about you but whenever I am launching a new product one of the hardest things is finding the right price point. For me it starts something like this. Right after I come up with an innovative idea I jump to setting an initial price point. The next thing that happens is I start making sales projections. If I sell one hundred I will make this much profit. Of course I continue to increase the projections. What if I can sell five hundred, one thousand, or even one million? If I don’t like the projections, then I increase the price point and start making new projections. Now I beg to ask, is this process helpful? Or am I just revealing a level of greed? There are three things I always take from this process and none of them are the actual price point.
1. A feasibility gauge. When you run the numbers like this and you start to realize that you need to charge a ridiculous price and sell to tons of people you question the product’s feasibility. This serves as a quick check to see if the innovation can be profitable. For more on feasibility see 50 Questions that Will Make Your Next Idea Thrive.
2. The need to set an actual price point which is fair. I like to follow the wisdom “don’t try to get rich off of one client”. You should be proud of your products and the fact that they give an advantage to your clients too. If your price point is too high, your clients do not benefit. That needs to be balanced with things like your level of expertise, supply verse demand, costs, risks, market conditions, and other factors.
3. Goals and targets for the product. Knowing possible sales projection scenarios helps me set realistic goals and targets. It can be a danger to get caught up in the “what if” scenarios; but, knowing the scenarios is better then going in blind.
Is your price point too low? Don’t cut yourself short. It is harder to increases your prices then to decrease them.
