Setting prices

A price is a signal of the value consumers expect to receive in a product or service. It’s also the amount of money a customer must pay to take ownership of the product. In other words, to buy it. Now, be sure not to confuse price with cost or value. The cost is what you, the manufacturer, must put into the product to make it and sell it. Value, on the other hand, is the accumulation of benefits the customer gets from a product or service. Those benefits can be functional in nature, economic in terms of saving money, or emotional in terms of how consuming a product makes you feel. When considering buying a product or service, consumers compare price and value to make that decision. They ignore completely what it cost you to make the product. So don’t ever base your prices on your costs. If you do, you may end up with prices that don’t reflect the true value of your product or service. So here is the rule all consumers use when buying something. If they perceive the value of your product to be higher than your price, then they will buy the product. If perceived value is equal to price, then they might buy it. And if value is less than price, they will not buy your product. Consumers equate price as an approximation of the value they’re likely to receive. So, be sure to set your prices at or slightly below perceived value of the product or service.