Many businesses struggle to find out how to calculate the product selling price. Now tackle this challenge and find the best pricing strategy for setting the product’s selling price.
What is the selling price?
The selling price is the final price that the customer or client pays to get it. It is quite imperative to offer the right selling price. This is because if you do not make a profit while also securing a position in the market, then your business will not survive at all. So let us look at some product-selling formulas and strategies.
Product Selling Price Formula
To calculate your product selling price, use the below-mentioned formula:
Selling price = cost price + profit margin
The cost price is the price that a retailer has paid for the product. On the other hand, the profit margin is a percentage of the CP, which is the cost price.
Here is how to calculate the average selling price:
Before calculating your selling price, you should know the average selling price. This is because it is quite important to comprehend the average SP (selling price) of existing products. So, the average selling price can be calculated using the below-mentioned formula:
Average selling price = total revenue earned by a product ÷ number of products that are sold in the market.
Here is how to calculate the product selling price by unit.
If you want to calculate your product’s selling price by unit, then don’t worry, as we have got you covered. Just follow these three steps, which are mentioned below:
- Calculate the total cost of all the units that you have purchased.
- Divide the total cost by the total number of units that you have purchased. You will then get the cost of the product.
- After that, simply use the selling price formula to calculate the final selling price, in case you want that too.
How to find the best pricing strategy
If your competitor’s pricing strategy is the same as yours, then it is like missing out on utilizing a useful tool that could make you go ahead. Like it or not, customers infer a lot of information about your business just by knowing your product prices.
Another thing is that the results of the price changes are not always linear or constant. For instance, a company could raise its prices just by 2% and see the overall profits increase by far more than that, even if demand remained the same, so think about this as well.
Product Pricing Strategy: Quick Tips
- The first and foremost thing is to have a strategy and stick to it no matter what happens.
- Make use of pricing analytics to record market trends and predict future market changes.
- Be holistic and look at the whole picture, not just on a transaction-by-transaction basis.
- Adopt a value-based approach to customer satisfaction.
- Don’t use a one-size-fits-all approach; rather, be adaptable. Create various pricing plans as well as product variations for customers with different requirements.