When introducing a product or service into a market, the costs of delivering the said product or service come into play. Once the decision to deliver a product to the market has been made and depending on the product, the process of production is launched. This brings into play costs that include sourcing for raw materials, the production process, packaging and shipping to the destination where the product will then be delivered to its market. In the event of a service, the type of service is taken into consideration with the following questions being addressed: Is it a service that will require third party vendors or is it one that can be delivered directly to the consumer? What overhead costs will be experienced in service delivery?
Once the initial costs are considered, then the pricing of the product or service is at its initial stages. The following would then need to be considered:
- Are there any costs to rent out a premise for delivering the product or service?
- Is there a team that is working to ensure delivery of the product or service?
- Is there a cost to store the product prior to delivery?
- What is the cost of promoting the product?
- Are there any other foreseen costs to ensure product is delivered?
Indeed, the initial production costs are at the onset of ensuring the product is available. Other significant costs also come into play following the production of the product and these should also be considered. What comes to mind is the eminent risk of over pricing the product or service by taking into consideration all the costs of production and delivery.
A key takeout is that once a product is priced a comparison ensues to position the product or service against other entities who could be providing the same. A good consideration to make when deciding on the pricing of the product is to make an analysis of other similar ones on the market and then decide on a threshold for your item so as to ensure the product is not priced out of the market.
Because the market will make several considerations prior to purchase of your product or service, it is also important to consider a suitable pricing strategy for your commodities in order to ensure your costs are considered as well as a suitable price placed for the product or service that will ensure you operate at an optimum in the market. What is imperative is to take consideration your costs and to tally these into what the market offers as a price point for the delivery of the same commodities you are offering.
A different strategy to take into consideration when pricing is to be cognizant of the different segments within the same market for your products or services. This would then allow you to have a tier system where you have different price categories to suit the different market segments. This indeed is a key strategy when entering the market. To be able to play within different segments with the product or service portfolio on offer ensures that it is possible to also stagger your production costs across your portfolio. This provides a means to manage the eminent production costs and cascade them to different segments in the market you serve.
What is key to note is when pricing for entry the price point you select will make or break the performance of your product or service in the market of choice. Consideration should therefore be taken to ensure a suitable price range for your business.
Nyangi Consultants LLP 