At this point, your idea has transformed into an invented product that is ready to be introduced to the market. You have most likely begun your market research to gain a better understanding of the market, your consumers and their needs, as well as your competitors. With this, it’s now time to determine the price.
I will respond to this question in two ways: market research and manufacturing. Both of these factors will provide a better understanding and determination of your target sale price.
As you conduct market research, one of the primary questions you should have asked potential customers is: “How much would you pay for this product?” Getting feedback from within your market will give you a great idea of how much people are willing to spend on a new product. Obviously, people will avoid giving you a high figure so always take these responses with a grain of salt as they are often the low end of the pricing spectrum.
What if your product is unique? If your product is new and novel, there is most likely nothing like it in the market. This means that comparisons are quite difficult to make so any insight or feedback within the market is valuable.
On the other hand, if there is a similar product on the market, I suggest aiming for a similar price. If this is impossible to achieve and your price is higher than the already established product, your product has to make up for the increase in both quality and functionality. These aspects also have to be communicated to the market so that people are aware of the benefit that comes in paying more for a better quality and useful product.
Once you have completed your market research and considered the sale prices of your competitors, you now have to reverse the process. Take the price that the manufacturer has quoted you for the final product. Add the shipping and the taxes to the quote. Then, consider and add in other potential expenses, such as marketing, advertising and storage for the product.
If you decide that selling to a wholesaler or a retail company is more beneficial and practical for your needs, take into account the markup costs associated with each. Typically, I factor in 50 to 100% markup for either wholesalers or retailers. This means that if you are looking to sell a product to the end consumer for $10, you should aim to sell this to the wholesaler for $5. By taking your margin off, this will then give you a price to which you should aim. However, always make sure that you are covering expenses as well as any other outlying costs such as those listed below.