How to set the price of a product or service?

I often find that my digital marketing students overlook that price fixing It is one of the marketing variables that most influences the sales of a product, and that are incapable of correctly setting the price of a service or a product. Let's see how to set the price of a product or a service?

This article aims to help you set the correct price for any product or service.

1. Pricing by cost + margin. That is, we calculate what it costs to offer a service or create a product and we add the margin that is necessary to obtain the expected profitability. This is the only way of setting prices that my students can think of, and it's not bad! But it can't be the only way. We must consider other variables.
2. Pricing based on competition. Our competitors' prices must be taken into account as a reference and we must set our own prices based on whether we want to position ourselves above, equal to or below them. Not only does the profitability of the project depend on this variable, but it also has a strong effect on our brand image.
3. Pricing based on how long demand will lastThis method of setting prices always surprises students and is one of the most used, especially for services. It consists of setting a price based on parameters 1 and 2, and increasing it regularly to see if orders continue to come in. When we notice that they slow down, we have surely reached the “fair” price perceived by our clients.
4. Pricing based on a product's life cycle. A product or service should not have the same price when it is first launched and we want people to know about it, as when it is fully operational, or when it is discontinued and we publish it on our “gang list”.

We should take these 4 variables into account every time we set a price.

There is a fifth variable that is a bit dangerous but can make sense in certain cases:

• Pricing according to distribution channel. That is, for some clients we have one price and for others another price, depending on the distribution channel through which they arrive and the type of client. This fifth variable is useful when you are already well established and have a good handle on a pricing strategy. I do not recommend it when starting an activity or when making a business plan… it is better to focus on the previous 4.

Well, I hope that this information has been useful to you and that from now on you know how to set the price of a product or service, and that when you have to make a business plan, you calculate the prices well or at least do it a little more rigorously.

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