#general-chat
Thread
Hey guys, how do you decide what to price your products?
We haven't been paying too much attention to pricing but suddenly realized we don't know how.
Sure we have considered like from a cost perspective but we haven't figure out how much higher we can push the price ceiling if that make sense.
Any advice into what you consider, how you go about testing?
Can you give us a little bit more context?
What’s your product?
What challenges have you faced?
How are you pricing right now?
+ any other important info
^^^
For perspective, before I started working with scrappy start-ups, I was in a private equity backed growth company with most of leadership coming from Proctor & Gamble, I also worked at KOHLER when they were doing $6B. The old school CPG method is consumer research. Surveys and concept testing. You get a statistically significant sample size and ask questions on a 1-5 scale to understand take rate (how likely are you to buy at different prices). Happy to show you an example of a concept test if you want to DM but can't post publicly.
More perspective, at KOHLER I managed faucets at Lowe's. Every month I had to go to a store and manually write down the prices of every product in the aisle to make a chart and share with leadership. We priced at the margin we needed and where we felt we fit with competition. My pricing professor at business school would have a heart attack hearing this and insist you use conjoint analysis to understand willingness to pay.
PRICING! Ugh, I feel like i never know if I am doing this right but as a rule of thumb (and from the mouth of Spanks founder, Sarah Blakely) always reach for 4X landed costs - it may be less if you have a very expensive product or have 'add on's' that can support a lower upfront margin on the main product. I hoover between 3-4X now but have increased my prices 30% since launching a couple years ago. Another thing to consider is how you want to be viewed in the marketplace? Are you trying to be a the best priced - value brand or top of line - quality driver, etc etc....just some other things to consider when making these decisions.
One more consideration is promo strategy. If you like to use price promotion with frequency, ensure your pricing allows room to make your necessary margin when discounting (High-low strategy).
Super useful tips guys! Also love the 'reality vs academia' story haha
Some context
1. we are selling cameras. we have an exclusive license to distribute
2. the way we price is really just 2-3x our costs. nothing sophisticated
3. our main cost are buying the goods and ads
4. we havent really run promos yet.
5. we have accessories too like batteries that we do bundles that we price by intuition too
@Eng Heng where are you selling?
Usually when you have a license they also give you an MSRP, do you have wiggle room?
Southeast Asia. yeah so they gave us all the freedom to decide the price