What should I consider when pricing my product?
I know that I need to at least make back what it costs to make, but how do I know how big of a markup I should take? Will it be different if I sell my books on my website vs in a store like Amazon or Barnes n Noble?
How I do it, is my clients pay via bank transfer, the contract states due and payable in advance of the monthly services. My contracts also state I own all creative, content, copyrights, et all, until the term of the contracts expires and is paid in full.
If they don't pay, I require everything to be deleted in violation of the above terms.
Also, if you are trying to sell on Amazon or any other market place, you need to take into considerations the fees associated with the price. Cost of Goods (COGS) should reflect a margin at least 45-65% above the cost so that there is wiggle room for promotional activities.
What people will pay for it. That's the only thing that counts. If you can't produce it for less than that and make your target profit, then you're in a losing proposition
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My business is a service business: So, I look at competition first, do a thorough review in my space and region; then I look at my costs, base costs plus any subcontractor or materials. Then I estimate margins based on all my expenses (healthcare, office supplies, travel etc); I also use salary wizards to have insights on an FTE with my experience and depth of knowledge to know what they make annually.
Products: I wrote and sold books a few years back. Any other platform (ebay, amazon etc) all have percentages, so make an adjustment. You have shipping and handling costs, strongly recommend you combine into a flat rate. Managing by location (zip) is a nightmare. Pick an average and use that as your shipping and handling. Go to UPS or post office and find out what weight, materials, labor cost and postage from the nearest city to the furthest away, and pick and average.
Interviewing publishers help you in understanding the business. Books aren't moving like they used to, so be careful.
I recommend pricing from the top down, instead of the bottom up. The old-fashioned bottoms up method uses the cost of goods as the starting point, add expenses and overhead and then profit.
Instead use the top down, get the maximum price possible, based on your offerings and your industry, then subtract costs and you end up with profit margin.
Do not be afraid to charge appropriately. You can also have sales and give discounts to lower buying resistance - but you will have established the "value" of your product by publishing the higher list price.
Everyone likes to think they are getting a "good deal"
All your questions can only be answered after analyzing the industry you are positioned and the way your competitors target. Get a list of top 10 competitors in your industry and do a comprehensive research on their pricing. Set pricing at a nominal range and make sure to provide some added value when compared to your competitors.
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1. Competition pricing
2. How much people will pay for it
Will it be different if I sell my books on my website vs in a store like Amazon or Barnes n Noble?
It depends on you. Usually people sell at the same price. But there are few that sell for less on their website because it will increase reliability of the person and more people will visit his site in that case.
When selling products online in an e-commerce or so-called webshop you should keep the following in mind:
First of all, your costs need to be covered
1. Make sure all indirect and direct costs are covered.
2. Be aware of hidden costs: Shipping, taxations, duties etc. Ensure you don't forget any of them.
3. One often also forgotten: Your own salary. There are so many companies in this world where the owner does not count himself as a paid employee.
I am not saying you can't sell anything below the total cost price per product. Often to be able to compete you lower the prices on certain products and use cross sales you balance it again. Still, you need weekly insights about how your costs are developing so you have a baseline to set prices.
What does the market say? Want do the customers want to pay for it.
1. Check the pricing of your competitors. Make sure you get the right picture. For example. Some competitors look cheap but add a so-called administration fee at the end or ask a higher than average amount for shipping or using a certain payment gateway.
2. Learn more about you customers. Who are they? What do they earn? What do they spend? How do they spend it? Bases on this you setup you pricing technique. For example high price, low price, high price with discount, low price with upselling. You need to know how to setup the "trap".
3. Different customer, different price. Coupons are your best buddy. You can do A/B testing or create awareness. Also, you can make your products look cheaper than they really are?
4. Ensure pricing is in sync with the appearance of your brand of web shop. Targeting the big spenders then don't build a website that looks like a basic supermarket and don't lower your prices too much. Some people on this world only spend big!
Pricing and presentation should definitely need to be adjusted if possible, based on where you will be selling your products. When a customer purchases a book or product from Amazon, or Barnes and Noble, they are a customer of that platform. Customers have already come to expect the type of packaging, presentation and shipping speeds from these platforms, but when a new customer is purchasing directly from your website, you'll need to put in a bit of work to impress. You should probably include some goodies, or put your book into a custom branded gift box, which may increase your costs, but at least you won't be paying any additional seller fees for each sale. Like many other answers in this thread, make sure you include at least a 40%-60% margin so you can afford to discount your products once in a while!