|94th Aero Squadron|
A product priced too high might fail just after launch and not be able to gain momentum with consumers. A price that is too low might generate a lot of sales but could end up damaging the long-term brand image of the company. Low quality and value is not something most companies want to be seen as.
Below are three methods you could use. They may be modified based on the individual circumstances and factors associated with the market.
Cost Method: The method of cost plus some safe margin. You should figure out what you need to break even and then what you need to make a reasonable return on investment. At this point you know what number is the bench line where above means you are doing better than expected and a little below means the product has ties up capital.
Perceived Value: Consumers may see different value based on their product. Typically they make some type of mental comparison and then determine what they would be willing to pay for that product. Sampling consumer price points can be helpful in determining what the wider market would be willing to pay.
Market Comparison: It is beneficial to compare your product and its features to similar products in the market to determine its competitive place. Depending on which strategy you plan on using, the market average becomes a type of benchmark. Know how your product's features line up against competitors.