Knowing the right price point for your products or services is essential in generating a high conversion rate and the most profit. The right price tag can attract a whole new set of customers.
There are several things that need to be factored in when test pricing a product or a service:
1. Product value. Rule of thumb: make sure that the selling price of your product is greater than what it costs you to manufacture, package and market it.
2. Perceived value. One customer may value a product differently from another customer, especially if your products have many features/benefits. However, the overall perceived value of your products can be impacted by the price tag you attach to it.
Customers use prices to benchmark the quality of products. If you set your prices too low, customers may think that they are not of high quality, defective or not in demand. Don’t slash the price too much as this may cause your products to become undesirable to your target market.
3. Numbers in prices. Some numbers prove to be more appealing than others when it comes to the prices of products. You can test how your own target market reacts with the numbers in prices. For example, you can have test prices ending in 5, 7 or 9.
Setting the right price for your products or services can help you maximize your profit while keeping your customers satisfied. Effective pricing can also help you avoid serious financial problems caused by pricing products too low or too high – if you charge too low you may not be able to keep your business afloat, but if you overprice you may scare away potential customers.