SME entrepreneurs engaged in selling various products need to understand how to calculate product pricing costs, as this is a crucial factor that indicates whether your business will thrive or decline.

Many SME operators, especially newcomers, often face challenges in determining product pricing costs and frequently fail unnecessarily simply because they do not know how to set reasonable prices for their products.

Therefore, in this article, we will explore some simple techniques for pricing products that we will discuss here.

Get to Know Your Products Well First

Before setting prices, new entrepreneurs must understand their products, including the cost per unit and the type of product they are selling, such as fast-moving general goods or niche products targeting specific groups. Both types can have different profit margins, which need to be assessed based on costs, the number of competitors, and consumer demand. Of course, niche products can yield higher profits but also have a smaller target audience compared to general products.

Market Research or Check Average Prices

Before setting prices, it is essential to conduct market research to check the prices of similar products and services. Determine the average price and then calculate your costs to see how much profit you should add to arrive at a suitable price that aligns with market rates.

For example, if a piece of fashion jewelry costs 500 baht, and similar items in the market with comparable design and quality are priced between 969 and 1,000 baht, this gives us an idea of how much profit we should add. Generally, this would be around 80% to 120%, ensuring that customers do not perceive our products as overpriced or surprisingly cheap.

SOURCE: smartsme