EPISODE NOTES
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Today’s episode is all about pricing, in particular how to work out the price for your product. There is a plethora of information online about how to work out your product price, from working out manufacturing costs, packaging costs, and then adding profit on top of it.
My advice is different. I advocate working out your product price first. Do your research, learn the market and decide what you want to sell your product for. Then work backwards to see if you can make it cost effective. I believe using this method can save you a lot of time and heartache down the line.
Listen in to hear me share:
- Why I wanted to record this episode (00:45)
- The method I think you should use for working out your product price (01:23)
- Why it is important to decide on your price first (01:35)
- The importance of doing your research (05:57)
- Working out where your product fits in the market (07:09)
- The advantages of knowing your product price as you develop your product (08:25)
- What to do if there is nothing else similar to compare it to (09:50)
- Ways to reduce the product costs for you (10:32)
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Transcript
Welcome to the Bring Your Product Ideas To Life podcast, practical
Vicki Weinberg:advice and inspiration to help you create and sell your own physical products.
Vicki Weinberg:Here's your host Vicki Weinberg.
Vicki Weinberg:Hi, I hope you're doing well this week.
Vicki Weinberg:So today we're going to have a potentially fairly short episode.
Vicki Weinberg:Just me, no guests, because there's a topic I wanted to talk to you about that
Vicki Weinberg:I've been hearing a bit about lately, I think it's quite important and I think
Vicki Weinberg:we need to address, and that is how to price your products and specifically how
Vicki Weinberg:to decide what you're going to charge for your product before you've sold it.
Vicki Weinberg:And when to make that decision.
Vicki Weinberg:So, um, the reason I want to record this episode is there is loads of information
Vicki Weinberg:about how to set a product price.
Vicki Weinberg:If you Google it, you can get lots of results and lots of what you will see
Vicki Weinberg:will tell you that to work out how much you're going to sell your product
Vicki Weinberg:for, first you need to work out all of the costs involved in creating it,
Vicki Weinberg:maybe storing it, shipping it, um, add on a profit margin and there you go.
Vicki Weinberg:And I do see a lot of sellers taking this approach, but if I'm
Vicki Weinberg:going to be really honest, I don't think that's the best way to do it.
Vicki Weinberg:So what I'm going to do in this episode is explain why I don't think
Vicki Weinberg:that is the best way of doing things and what I suggest you do instead.
Vicki Weinberg:See, what I believe is that you need to work out your product selling price,
Vicki Weinberg:so what you're going to charge for it, before you even start to source it or
Vicki Weinberg:work out how much it will cost to produce.
Vicki Weinberg:And this is why.
Vicki Weinberg:So have you ever been looking online for something, let's see, you're
Vicki Weinberg:looking for a certain product online and you see something and it just
Vicki Weinberg:seems way too expensive for what it is?
Vicki Weinberg:If that is the case, okay that's probably happened to you.
Vicki Weinberg:Maybe you're on Amazon and you're looking for, yeah, you're looking
Vicki Weinberg:for something in particular.
Vicki Weinberg:Let's say you're looking for cushion covers and you're scrolling,
Vicki Weinberg:scrolling, scrolling, and you see lots of cushion covers and they're
Vicki Weinberg:all around the 12 pound mark.
Vicki Weinberg:And then you see some and they're priced at 20 pounds.
Vicki Weinberg:Um, and maybe they haven't got many, any more reviews on the others, they haven't
Vicki Weinberg:got better reviews than the others.
Vicki Weinberg:You take a look, they don't seem to have any features.
Vicki Weinberg:Are you then going to think to yourself 'well, I suppose it costs them quite a
Vicki Weinberg:lot to make these, and then I guess they needed to get them shipped over here.
Vicki Weinberg:And then probably they're paying a warehouse fee and they're paying postage
Vicki Weinberg:and they're paying Amazon fees and I suppose they want to make a profit.
Vicki Weinberg:So, hm, I guess that's a fair price!'?
Vicki Weinberg:Probably not.
Vicki Weinberg:Um, I certainly don't, because the thing is, customers do not care what
Vicki Weinberg:it costs you to produce your product.
Vicki Weinberg:Not, you know, not to be rude here, but they don't, and that's not to mention,
Vicki Weinberg:you know, all the other costs involved.
Vicki Weinberg:They don't really care what it costs.
Vicki Weinberg:They, what they're interested in is what it costs them.
Vicki Weinberg:And if you decide to price your product way higher than everyone else, just
Vicki Weinberg:because your costs are higher because perhaps um your competitors have
Vicki Weinberg:been going for a long time or they're negotiating bigger quantities let's say,
Vicki Weinberg:so they can afford, you know, to pay slightly lower costs to their suppliers.
Vicki Weinberg:If that, you know, all of that might be true.
Vicki Weinberg:Um, so, you know, you might feel like you have to price your products higher
Vicki Weinberg:because yeah, it actually costs you more.
Vicki Weinberg:The customers don't care about that.
Vicki Weinberg:They they're going to buy something based on whether they think
Vicki Weinberg:it's worth x amount of money.
Vicki Weinberg:Um, because like I say, few, if any, people think about the chain of events
Vicki Weinberg:that take place before they buy something and if they do, I guess the things
Vicki Weinberg:they're more likely to be interested in is the sustainability aspects.
Vicki Weinberg:You know, people might want to buy something that's made locally, that
Vicki Weinberg:hasn't been shipped from China, et cetera, but they're not going to care
Vicki Weinberg:really about what it has cost you.
Vicki Weinberg:I guess the only caveat here is that perhaps, you know, if you, if your
Vicki Weinberg:product's made in the UK, it might be slightly more expensive to make
Vicki Weinberg:than it would be to make overseas.
Vicki Weinberg:And obviously having it made in the UK might be a selling point for you.
Vicki Weinberg:And therefore the price might reflect that.
Vicki Weinberg:But with all that said, your price still has to make sense in the marketplace
Vicki Weinberg:because people aren't going to pay more money just to help you make a product.
Vicki Weinberg:And in fact, even if you are selling a premium product and you want
Vicki Weinberg:to charge a premium price, you still won't get everyone on board.
Vicki Weinberg:So for example I used to sell, as you know, bamboo baby products, um, and bamboo
Vicki Weinberg:products costs more to manufacture than similar products made of cotton because
Vicki Weinberg:bamboo is a more expensive material.
Vicki Weinberg:So, therefore I charged more than comparable cotton swaddles and towels and
Vicki Weinberg:other products because I'll be choosing bamboo, not because it costs me more,
Vicki Weinberg:but because bamboo has lots of amazing natural properties and I believed it was
Vicki Weinberg:a more premium material and therefore I could charge slightly more and, you
Vicki Weinberg:know, and I did sell a lot of products.
Vicki Weinberg:So I, I think my pricing was pretty much correct.
Vicki Weinberg:Um, however, unless a customer knew and cared about how great bamboo is,
Vicki Weinberg:many people probably wouldn't pay more for my products when they can
Vicki Weinberg:get something cheaper and potentially just as good for what they want.
Vicki Weinberg:Because actually, even if somebody does know, you know, about the
Vicki Weinberg:benefits of bamboo, it doesn't necessarily mean they're willing to
Vicki Weinberg:pay more for it because, you know, everyone has different priorities and
Vicki Weinberg:different things they're looking for.
Vicki Weinberg:So while I could justify pricing my products higher than comparable
Vicki Weinberg:costs and products, because as I say, because bamboo is a different material.
Vicki Weinberg:I still had to look at where I positioned myself amongst the other
Vicki Weinberg:bamboo baby products on the market.
Vicki Weinberg:And I did this and I set my price before I went to find out how much the products
Vicki Weinberg:were going to cost me to actually make and ship and all of those things.
Vicki Weinberg:Because this and it brings me back to the basic point I'm trying to get across
Vicki Weinberg:in this episode, which is if you do your research and you've heard me talk about
Vicki Weinberg:research so many times, so I do apologize, but if you do lots of research before
Vicki Weinberg:your product, you know, before you even start sourcing your product, um, you can
Vicki Weinberg:make sure that you set your product price.
Vicki Weinberg:Uh, you set your product price somewhere where it makes sense.
Vicki Weinberg:And I believe this is really important because looking at the other side
Vicki Weinberg:of this, another completely, another scenario is that you find out what the
Vicki Weinberg:production cost of your product is.
Vicki Weinberg:You add on some margin and you go, right, that's what I'm going to sell my
Vicki Weinberg:product for, but you could actually end up being way cheaper than other products,
Vicki Weinberg:which customers would also question.
Vicki Weinberg:Um, I don't know.
Vicki Weinberg:Coming back to my example of scrolling on Amazon, have you looked
Vicki Weinberg:for something and everything's around, you know, let's go back
Vicki Weinberg:everything's around the 12 pound mark.
Vicki Weinberg:Then you see something that's five pounds.
Vicki Weinberg:Um, you might have, depending on what it is you're looking for, you might also,
Vicki Weinberg:you might also be suspicious of that.
Vicki Weinberg:So I guess the main point I'm trying to get across here is that if you know the
Vicki Weinberg:market in which, in which you're hoping to sell your product really, really well and
Vicki Weinberg:you know what other products are on the market and you know, what they're selling
Vicki Weinberg:for, you know, what kind of features they have and you just know what's out there.
Vicki Weinberg:Um, I, as I say, I know I talk about doing this kind of research a lot,
Vicki Weinberg:but I do think it's really important because that can help you make sure
Vicki Weinberg:you get your product pricing right.
Vicki Weinberg:So I've told you what not to do.
Vicki Weinberg:What do I suggest you do?
Vicki Weinberg:I suggest that you set your product price before you start to look at costs.
Vicki Weinberg:So, as I mentioned, you need to have a really good overview of the market.
Vicki Weinberg:So you need to know what other similar products to yours are selling at the
Vicki Weinberg:moment and then you need to work out where your product fits into that.
Vicki Weinberg:So for example, is your product at the premium end of what's being offered?
Vicki Weinberg:You know, has your product got additional features, is
Vicki Weinberg:it made of different material?
Vicki Weinberg:Was it, whatever it is, can you justify it being at the
Vicki Weinberg:higher end of that price range.
Vicki Weinberg:Or is there a maybe a simpler product and maybe it's something
Vicki Weinberg:that you've stripped down.
Vicki Weinberg:You've made it a more, a more basic version and therefore you'd be looking
Vicki Weinberg:to price it, should reflect that.
Vicki Weinberg:Uh, I really recommend making sure that you can justify your product's
Vicki Weinberg:price, that you can look at the other products, your competitors, and you can
Vicki Weinberg:say 'okay, well they're charging this and my product is actually a little bit
Vicki Weinberg:better than theirs because of X, Y, and Z.
Vicki Weinberg:Therefore, I'm going to charge at this much more'.
Vicki Weinberg:This way, you know that the price you're setting is realistic.
Vicki Weinberg:So when it comes to selling your product, hopefully customers will realize that too.
Vicki Weinberg:And of course, you know, you do have to demonstrate, you need to
Vicki Weinberg:do other things to demonstrate that your product is worth the price
Vicki Weinberg:you're selling, whatever that is.
Vicki Weinberg:So a good product description and product images, are always going
Vicki Weinberg:to be important, wherever you sell.
Vicki Weinberg:But also when it comes to looking for a manufacturer to make your product,
Vicki Weinberg:it makes it much easier to narrow down suppliers because you have an
Vicki Weinberg:idea of what you need the cost to be.
Vicki Weinberg:And if the cost ends up being lower than what you need it to be,
Vicki Weinberg:great, you just make more money.
Vicki Weinberg:So there were a few important reasons I'm asking you to think
Vicki Weinberg:about the selling price before you look closely at the costs.
Vicki Weinberg:So one is that if you've done your research and I know I keep saying the
Vicki Weinberg:word research, but you will have a better idea as where your product fits in.
Vicki Weinberg:Secondly, if you know your target selling price, before you get the quote,
Vicki Weinberg:you can actually be objective and rule out potential suppliers much faster,
Vicki Weinberg:much easier than if you haven't got a clue at what kind of cost you need.
Vicki Weinberg:So, as an example, let's imagine that similar products to yours
Vicki Weinberg:are all selling for somewhere between ten and fifteen pounds.
Vicki Weinberg:And when you get your manufacturer's quotes, you find out that the total
Vicki Weinberg:cost of goods is thirteen pounds.
Vicki Weinberg:So, if you hadn't yet decided on a price, you might therefore be inclined to price
Vicki Weinberg:your product at let's say 18 pounds.
Vicki Weinberg:So you're making a profit.
Vicki Weinberg:But if your product, if you're pricing like this and your product is going
Vicki Weinberg:to be, you know, the most expensive on the market, unless it can justify
Vicki Weinberg:that, you're going to have problems when it comes to actually selling it.
Vicki Weinberg:Because what you've basically done is plucked a figure out of thin air.
Vicki Weinberg:So, um, for all of these reasons, um, I suggest that we think about
Vicki Weinberg:doing things slightly differently.
Vicki Weinberg:What I will say about all of this is that if your product is completely
Vicki Weinberg:a hundred percent original, this is going to be trickier.
Vicki Weinberg:However, I'd also say there's no such thing as a hundred percent original,
Vicki Weinberg:because your idea will probably be, there might be something similar, even if that
Vicki Weinberg:similar thing isn't you know super, super similar, there might be some similarities.
Vicki Weinberg:Um, and also remember you should be doing other kinds of research as well.
Vicki Weinberg:So if you do have a completely original product, hopefully you'll also be
Vicki Weinberg:speaking to potential customers.
Vicki Weinberg:Would you buy a product like this?
Vicki Weinberg:What would you expect to spend on it?
Vicki Weinberg:And then you can kind of review that and actually whether your products
Vicki Weinberg:are original or not, that's always great research to do, but you can
Vicki Weinberg:kind of review all of this, um, and make an informed decision.
Vicki Weinberg:And if it turns out that when you speak to manufacturers, the quotes are
Vicki Weinberg:more expensive than you'd anticipated.
Vicki Weinberg:They're always things you can do there as well.
Vicki Weinberg:So perhaps you could look at alternative products, you could look at different
Vicki Weinberg:manufacturers, you could look at sourcing in different countries.
Vicki Weinberg:You could look at different shipping methods.
Vicki Weinberg:You can look at refining your product specifications to see if you can make
Vicki Weinberg:things work, but, and remember, you can always tweak your price as well once you
Vicki Weinberg:have the cost and even when it's selling if something in the market changes.
Vicki Weinberg:Basically what I'm trying to avoid here is you pricing your products
Vicki Weinberg:in a way that makes your products profitable without considering its
Vicki Weinberg:value and will people actually pay that.
Vicki Weinberg:And I would love to know, do you agree with my, my approach?
Vicki Weinberg:Is this how you price your products?
Vicki Weinberg:Do you do something different?
Vicki Weinberg:Um, as always, I'd love to hear from you and you can contact me
Vicki Weinberg:at Vicky, Vicky Weinberg.com or Vicki Weinberg UK on Instagram.
Vicki Weinberg:Um, as always, I hope you have a lovely week, um, take care and see
Vicki Weinberg:you next week with another guest.
Vicki Weinberg:Thank you so much for listening right to the end of this episode.
Vicki Weinberg:Do remember that you can get the full pack catalogue and lots of free resources
Vicki Weinberg:on my website, Vicki Weinberg.com.
Vicki Weinberg:Please do remember to rate and review this episode if you've enjoyed it
Vicki Weinberg:and also share it with a friend who you think might find it useful.
Vicki Weinberg:Thank you again and see you next week time.