How to price your products – with Vicki Weinberg

Vicki Weinberg: 00:00:08

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