More 2 Marketing

Susan
More to marketing. Welcome to More to Marketing podcast on marketing, product and everything in between. I’m your host, Susan, and today we’re gonna have a dive into how to price the product and also how to understand product economics. So slider voice, let’s go about how to price approx. Pricing a product effectively is a critical aspect of any business strategy. It involves more than simply assigning a number to your product. It requires a deep understanding of your costs, your target market, and your competitive landscape. Additionally, to make informed decisions, you must grasp the concept of product economics. So we’re going to dive into this right now. So the pricing process itself contains many different steps. So First off, you really have to have a cost analysis start with a comprehensive analysis of your production and operation costs. This includes raw materials, your labour overheads and any fixed costs like rent or equipment. Consider variable costs that change with volumes that you produce. Then calculate the break even point the number of units you’ll need to sell to cover all. Those costs? Research market research is your best friend. Understand your target market and what are they willing to. Pay for your product. Research competitors pricing as well. Are you offering something similar? Do you have a unique selling proposition? Will that allow you to have premium pricing? When we start looking at all the different types of cost models and there’s a whole pile to consider. One of the ones is cost plus pricing, which is very common. This is where the cost plus pricing involves determining the cost of the producing the product and then adding a markup to set the selling price. So for example you might have the cost might be 20. Dollars to make the. Product and you want to add your surf plain 50%. Back up. This would mean that you’re saying. The product for $30. Value based pricing is a different method. You consider the perceived value of your product. Your customers irrespective to. The cost price. Well, you still make money, you know, I’m going here. If your product solves a significant problem or offers exceptional quality, you can charge more. Use pricing strategies like skimming, starting with higher prices and lowering overtime, or penetrating starting with the lower price to. Gain market share. Example. This is a software company. Pricing is premium version at $99.00 per month because it offers advanced features that users find highly valuable. Another way to look at pricing is psychological pricing. Set prices just below a round Number. So instead of 10 dollars $9.99 to create a perceived like reception of a bargain or a cheaper price, leverage the power of the 9:00. So another example here is not $100. At $99, it’s all part of the mine’s trick. Dynamic pricing, so adjust prices in real time based on factors like demand, competition or even customers browsing history. Use data and Linux to optimise these prices. Another way you could do pricing is based on competitive pricing. So competitive pricing involves setting prices based on what your competitors are charging for similar products. It can be used to position your products as a more affordable or premium in comparison. So smartphones smartphone manufacturer. Pricing is the latest model. A similar price to main competitor at the game market share. Dynamic pricing, as we’ve said, is just so much fun. Another model that is becoming more and more popular is the freemium model. The freemium model offers a basic version of. A prep for. Free and charges for the premium features or services. Here could be. A cloud storage provider offering free storage with an option to pay for additional storage capacity. But overall, the pricing strategy you need to decide what’s going to work best for you. Are you competing on price? Are you competing on differentiation through value? Or you positioning yourself as a premium. You need to consider that when building that pricing model, so give you a few examples to work with. Now we have to begin to understand what pro economics are as well, because they all mesh together. Product economics refers to the financial health of a product or service and involves understanding how costs and revenue are associated with the product over its life cycle. So some key components here is you’ve got your CAC CA C which is your customer acquisition cost. Is the cost of acquiring your customer, including the marketing and sales expense? Another one is COV. Customer lifetime value, the expected value, the expected revenue from a customer throughout their relationship with your business. Gross margin, the difference between the revenue generated by product and the costs directly of the product and delivering it churn rates at what rate are the customers stopping using or buying a product and leaving you burn rate, the rate at which our company spends its available capital over time? So get a. Grasp of them, of what you’re working on with your. And then that helps you with the protonics to understand where your sustainable growth is? It helps in decision making, such as scaling up a product or adjusting pricing or allocating your resources differently by optimising product economics, a company can achieve profitability and long term success. Continuous analysis and refinement of your product economics to adapt to changes in market conditions is essential. Nothing stays the same forever. You’re always going to have adjustments for costs and that needs to ensure that you make data driven decisions to ensure your profitability. Pricing your product is a multifaceted tasks. As I’ve shown you. With all these different types of pricing models and all the other pieces you need to consider. With your project economics. And involves understanding pertinent economics and choosing the right pricing strategy by analysing your CAC CLV gross margin, churn rate and break even points, businesses can make a more well informed decision about how to price their product and their service. Whether you opt for that cost plus value based. Competitive dynamic framing, which one will not be? It’s crucial to consider the broader economic implications and the long term sustainability of your pricing strategy. Ultimately, successful pricing aligns with your business goals. And customer value perceptions. So trying to always ensure that profitability and growth are within there too. Thank you for listening. To this podcast on from modern. Marketing follow to hear more. More to marketing.