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I often find business people who determine selling prices just by looking at competitors’ prices. There’s nothing wrong with doing market research, but if you just follow other people’s prices without calculating your own costs, the risk is quite big. Can be productIt looks like it’s selling well, but the profits are very slim.
In my opinion, the first step that must be taken is to know how much it actually costs to produce a product. Don’t just count raw materials. Also include packaging costs, shipping costs to the warehouse, electricity, marketing costs, and other operational costs. The more complete the calculations, the easier it is to determine a reasonable price.
After knowing the total costs, then determine the profit you want to get. The amount can of course vary depending on the type of business and market conditions. Most importantly, the selling price must still be able to cover all operational costs while providing a profit so that the business can continue running.
I also suggest not always competing to be the cheapest. Many customers are willing to pay more if they feel the quality of the product, service and shopping experience is worth it. Cheap prices can attract attention, but they don’t necessarily mean the business will survive in the long term.
Another thing that is often forgotten is conducting regular price evaluations. Raw material prices can change, operational costs can also increase. If the selling price is never updated, the profit that was previously calculated could continue to decrease without realizing it.
If I may give you advice, don’t be afraid to set a price that matches the value of the product you are offering. As long as the quality is maintained, the service is good, and customers get clear benefits, reasonable prices will actually make your business healthier than simply chasing sales with very thin margins.
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