This is one of the most difficult questions for any business to answer. Get it wrong and you could be out of business or your sells lag. Get it right and buyers will beat a path to your door. In today's post I want to give online sellers some ideas to help answer this question.
There is no one correct answer, but there are some considerations that will help you command a better price.
General rules of pricing.
Supply and demand. In order to set the best price for an item you need to know how much demand there is for the item. The more demand the higher the price that you can ask for the item. A function of demand is how big your market is.
For example there may be little demand in your city for an item and at the same time there maybe a large demand for the same item in your state or country.
Time is money. There is an old saying that time is money. Well in the world of sells this is very true. Most online sellers want to have a very quick turn over of their items. And in general this is a good rule.
There is however a price for fast turnovers. The faster you need to sell an item means probably the fewer buyers there will be that see the item. The fewer buyers that see your item, the lower the price that you will be able to command.
It is a matter of selling to the first buyer that comes along, or waiting until the buyer that is willing to pay you a higher price comes along.
Some items will sell for a higher price if you have a longer time window for selling. This is why online stores offer some some advantages over online auctions.
Cost Plus. This is a simple method of taking your cost and adding a desired profit margin. Becasue it is the simplist, many sellers use this method. And though this is a simple method it may not give you the best margins that you could get.
Meet Competition. Sellers often just decide to match or beat competitors' prices to gain or retain market share in a competitive market. This is also a simple method and is used by many sellers. It requires a little more research to do properly, because you have to know the prices of your competitors. And you have to keep your prices up to date with other prices in the market.
Perceived Value to the Consumer. You can charge the customer the value provided, regardless of its cost. Consider automobile repacement part cost, very high prices can be commanded for cheap parts that are crucial to maintain some autos. And the owners of the cars perceive that the value of these parts is very high. If the price charged for an item is commensurate with the benefits provided, then it will be considered a good value in the mind of the buyer. There are limits to how high the price can be set, but if you understand perceived value you can set prices that give you good margins.
Skimming. This method of pricing is the charging a high prices for new or noval items. If what you sell is on the leading edge of the types of products compared to your compatition, then you may be able to command a higher price.
Penetration. This pricing method is used to gain market share by starting at a low price and as it becomes a more popular item, or gains penetration, that the price is increased. Examples of this can be seen in car Japanese car industry. Initially many Japanese cars were low priced, but now that command some of the highest prices in the industry.
The Price/Quality Relationship. Becasue consumer perceptions are not necessarily based on just the physical attributes of a product, the "perceived" quality is often influenced by its price. Apparel, perfume, antiques, collectible books and jewelry are examples where the price itself affects characteristics of style and workmanship to a product just because of the high price charged.
No matter which pricing method you choose, you will need to gether information to make good decisions.
Where to get pricing information.
Online. With the popularity of the internet there are quite a few places online to get prices.
Buy looking up the items that you want to sell you can get an idea of what other online sellers are charging. This information can help you set prices. One thing to be aware of is that you may not be seeing the prices that items have sold at, but the price that is being asked for. This distinction is a very important one, becasue with some items the prices that are being asked for are prices that the item will not sell at.
PLACES ON THE INTERNET TO GET PRICING INFO
Auction Sites (that can be used as price guides) - Just click on any of the links below and go to the auction sites and enter your item to see prices that your item is being auctioned for.
Book pricing sites - Click on any of the links below to go to sites dedicated to pricing books.
Audio Book rental club. www.jiggerbug.com
Other Online Sites.
To price almost anything you can go to Google and enter the item name followed by price guide and you will get many sites devoted to pricing your item.
Books. There are some items where the internet still does not offer the kind of infromation that will allow you to make the best dicisions. This is where books come into the picture.
A FEW BOOKS TO CONSIDER
Collectibles Price Guide 2005
The Official Price Guide to Records
Beckett Baseball Card Price Guide
The Official Overstreet Comic Book Price Guide
Antique Trader Ceramics: Pottery & Porcelain Price Guide