Deciding where to set a product’s price can be challenging. You want to make the most of the purchase, but you also need a competitive price point. In order to balance the factors, here are some tips for how to price a product for retail.
Research Your Market
Researching your market is a valuable tool. Get into the minds of your customers and look at the demographics in your area—analyze the type of consumer you are attracting. Once you know the type of person who is likely to walk into your store and the price point they are willing to engage, you will have a better idea of how to price your products.
Also, see what the going price is for your product in similar stores and locations. This will help you figure out your competition as well as your customer. Conduct research based on your competitive advantage, too. If your advantage happens to be lower prices, then you should research with that in mind. Likewise, if your advantage is high-end brands, then search around that. Having a guiding idea will help you narrow down your prices in the right way.
Consider Price Reductions
Another aspect to factor in is price reductions. Think about how sales and discounts will impact the prices you set. For example, if you run a retail business and are selling a dress at ten dollars above market value but decide to discount the price, you may take off five to eight dollars, which customers will think is a good markdown. At this point, you would make two to five dollars in profits. So, when you are setting your initial prices, think about how low you can go without sacrificing your profits.
Use a Point of Sale System
A POS system is a helpful tool for researching your business’s highest sellers and setting the right prices. A point of sale system can also handle customer profiles, which can be helpful in the researching stage. If you have an online portion of your business, a POS system can help with that as well. The financial, managerial, and accounting functions all allow you to understand your business and its customers more thoroughly. If you do not already use a POS system, contact one of our professionals here at Business Software Solutions for more information on our retail accounting software.
With these ideas for how to price a product for retail, you will be able to set the right price for the right customers. Over time, you will become better skilled at anticipating prices, markdowns, and the overall financial situation for your business.