How Should I Price My Product? Avoid Inventory Issues by Getting Your Pricing Strategy Right
TL:DR: Pricing your product correctly is crucial for profitability and inventory management. Consider production costs, competitor pricing, customer buying power, and marketing expenses. Global supply chain disruptions and tariffs can impact pricing, making raw material forecasting and strong vendor relationships essential. Boon can help with demand planning, inventory forecasting, and sourcing to optimize your margins and keep your business thriving. ??
You’ve poured time, energy, and passion into creating your product, and now it’s finally ready for the market! But one critical question remains: How much should you charge? Pricing isn’t just about covering costs—it’s about making sure your product sells while keeping your business profitable and your inventory moving efficiently.
Many product-based business owners struggle with pricing, often overvaluing their products due to emotional attachment or underpricing in fear of losing sales. But the right pricing strategy can help you avoid cash flow problems, prevent excess inventory, and ensure sustainable growth. Let’s break down the key factors you should consider when setting your product’s price.
Key Factors to Consider When Pricing Your Product
1. Covering Costs: Production, Storage & Shipping
Your pricing needs to cover more than just the cost of making your product. Factor in:
A strong pricing model ensures that every sale contributes to your bottom line rather than just breaking even.
2. Value Perception & Customer Expectations
Your customers’ perception of value plays a huge role in what they’re willing to pay. Consider:
If your price doesn’t match the perceived value, customers may hesitate to buy—or worse, perceive your brand as overpriced or cheap.
3. Your Customer’s Buying Power
No matter how great your product is, if it’s priced beyond what your ideal customer can afford, it won’t sell. Research your target market’s spending habits and make sure your pricing fits within their budget while still generating profits.
4. Competitor Pricing
Consumers compare prices. If similar products are selling at a certain price point, your customers will expect yours to be in the same range—unless you offer a clear reason for charging more (better quality, sustainability, exclusivity, etc.). Research your competitors to set a price that feels right in your market.
The Numbers Behind Your Pricing
Beyond market perception, pricing needs to make financial sense for your business. Consider these key metrics:
Considering Tariffs & the Global Supply Chain in Your Pricing Strategy
Global supply chain disruptions, fluctuating material costs, and tariffs can significantly impact your pricing strategy. Many businesses find themselves needing to raise prices to maintain profit margins, but this can result in lost sales if customers can’t absorb the price increase. Strengthening your supply chain by developing strong relationships with reliable vendors and manufacturing partners is so crucial. Secure long-term agreements and negotiate pricing ahead of time, so your businesses can better manage cost fluctuations, avoid sudden price hikes, and maintain a positive customer experience. Understanding the broader economic landscape and proactively planning for potential cost increases will help your brand ensure long-term profitability and stability.
How Boon Can Help with Demand Planning & Sourcing
At Boon, we provide expert demand planning, inventory forecasting, and inventory management to help protect your product margins and optimize your supply chain. But we don’t stop there—through our extensive network of sourcing partners, we can connect you with proven vendors and manufacturers to ensure you get the highest quality materials and finished goods. This enables you to provide your customers with exceptional products and a seamless brand experience while maximizing profitability.
Forecasting Raw Material Needs for Better Pricing & Inventory Management
For product-based businesses, forecasting raw material needs offers a longer-range view of inventory planning. This is a strategy we've been utilizing with many of our current clients. Not many software and tech solutions allow for raw material or component forecasting. Because of our extensive retail industry experience, our team has the ability to create custom forecasting tools that empower your business to understand your inventory needs with this long distance view. Looking at a longer range forecast comes with many advantages. By committing to higher quantities of raw materials in advance, businesses can negotiate trigger dates with their vendors, allowing them to repurpose materials into top-selling items as needed. This strategic move not only enables you to secure better volume discounts but also enhances finished goods product margins. Proactively managing raw material procurement ensures smoother production cycles, reduces supply chain disruptions, and allows your business to remain agile in responding to market demand.
Finding the Right Balance
Pricing is both an art and a science. Set your price too high, and you risk slow sales and stagnant inventory. Too low, and you erode your margins and undervalue your brand. The key is to find a price that customers will say “yes” to—without hesitation—while keeping your business profitable.
Need Help with Pricing & Inventory Planning?
If you’re struggling to balance pricing and inventory, Boon can help. Our demand-planning strategies ensure that your pricing aligns with your sales goals and inventory needs, preventing costly stock issues and cash flow problems. Let’s chat and find the right strategy for your business!
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