How to Let Your Market Dictate Your Product Price

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					How to Let Your Market Dictate Your Product Price
If a Business has to be profitable the sale price of its goods or services needs to be more than the
cost price. A price that’s too high will lead to reduced sales. A price that’s too low will lead to
reduced profits, and consumers that think there’s something wrong with the product. So what’s
the answer? Let your market dictate your product’s price, that way you will find the optimum
price at which you can make the most revenue. In other words find out how the price elasticity
of demand affects your product. This video uses the example of a fish shop and a ferry service
to explain price elasticity of demand and how it can affect volume of sales and revenue. Watch
this video before you make any changes to your product’s price.

Real World Economics - Elasticity of Demand by Blessed_Hope

Let’s face it – setting the correct price isn’t an easy task. Even with all the “how to” books and
courses it’s still not that easy. Here are some things you can find out before you make an
informed decision.

Find out what the rest of the marketplace is charging for the same item. This sounds simple on
paper, but the reality is there is likely a wide range of prices for the same item. What you can do
is knock off the highest price and the lowest price and then calculate the average of the others.

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For example, you check the market and find 6 prices for Product A $20, $8, $15, $30, $10, $15
– you ignore the highest, which is $30 and the lowest which is $8, then you add together the
balance and divide by the no of item prices in this case it’s 4 with an average price of $15.

Another method you can use is to experiment with price points. If you are new to the business
you can use the market price to gain perspective and find a start point to experiment. If you are
an existing business you can take your current price and increase it by 5% or 10% and the
evaluate how that affects your sales volume and revenue.

© 2011 Apptivo Inc. All rights reserved.
There are all kinds of ways to set your product prices. Cost plus a percentage markup is one of
the most common methods. However, the most effective is to let the market dictate your price.

© 2011 Apptivo Inc. All rights reserved.

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