The Right Price for a Product - Explained
How do I set the right price for a product?
Written by J. Mance Gordon
Updated at April 17th, 2024
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
-
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
- Courses
How to Price a Product?
The best price for a product depends on a number of things. First and foremost, it depends on our production costs. Clearly, if we want to make money, we need to set our price higher than whatever it cost us to produce the product.
Another consideration when setting our price is our strategy. What are we trying to achieve, or what do we want people to think about our product?
There are different things that we could target - whether it's marketshare or profit (those are the two main ones). Whichever is most appropriate will indicate or dictate what price is right.
Next, we have to consider delivery costs. For some products transportation or delivery costs are relatively low. For other products they're quite high. Think about the difference between distributing packs of gum versus distributing automobiles. So, depending on our product delivery costs may be a major concern.
Next, depending on where we sell our product, we may have to consider taxes and tariffs. This depends on what type of product we have. Certain products are subject to taxes and domestic markets. Other times when we sell internationally, we have to consider the tariffs or taxes that those other countries put on our product.
Lastly, there are legal issues that we have to consider, because there are sometimes rules about how we set our price. If our product is regulated or there are laws about how we can determine our price, we have to make sure we pay attention to those.
Related Topics
- What is the Right Price for a Product?
- Competition-Driven Pricing
- Profit-Oriented Pricing Strategy
- Sales-Oriented Pricing Strategy
- Status Quo Pricing Strategy
- Value-Based Pricing Strategy
- Penetration Pricing Strategy
- Manufacturers Suggested Retail Price (MSRP) Definition
- Markdown
- Price Skimming
- Why Give Discounts?
- Trade Allowances
- Charging for Product Transportation
- Legal Issues with Pricing
- What is Product Dumping?
- What is Price Fixing?
- Why is Price Fixing Harmful?
- What is Price Discrimination?
- Why Pricing Discrimination is Harmful