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?
I think you must take care in mind the total worth of the product plus the expenditure you've made on the product individually. Also, you need to take care that the price should be reasonable enough to reach the targeted audience.
I think the first thing you need to do is to do a market research. Find the existing book in the market, whose content related to yours and think about your targeted audience. I hope that this thing will be helpful in pricing your product.
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.
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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Pricing is as simple as what can you charge to make money? While you can look at competition to help set an idea - it's not cut and dry, charge what they charge. Your competition may sell at a different price because of recognition, or because of volume. You didn't specify your product, and there may be mroe considerations, but Amazon for example can sell at a slightly different price than other sites/stores, because of the volume of shoppers, and their purchasing power. They're able to make smaller margins on some goods, because they'll make it up selling different items elsewhere. Also, Amazon and Barnes and Noble may give you a false sense of competition and pricing because of this. Different books, will have different value to some buyers than others - and the more demand the higher that can be charged, as long as the buyers see value in that cost. You could charge less - - - but you'd have to know that you're trading that lower amount per item, for selling more items - otherwise in the end, you're just making less money. You could charge more, but then you're going to sell fewer of each - if you're way out of the 'value' spectrum. It really comes down to what is your value to customers, and can you meet somewhere in the middle?
Before you set your pricing, work out the costs involved with running your business. These include your fixed costs and your direct costs.
Know what your customers want from your products and services.
Where do you want to be in the marketplace? Do you want to be the most expensive, luxurious, high-end brand in your industry, the cheapest, beat it by 10% brand or somewhere in the middle?
What are they charging for different products and services? What inclusions and level of service are they offering for those prices? What customers are they attracting with their pricing? And how are they positioned in the marketplace?
How much profit do I want to make?
Hope this help!
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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.
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.
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"