How to Price Your Products for Profitability
Are you ready to start selling your beauty products? Whether you're selling skin care or any product on your shelf, one of the biggest factors to consider is the perfect price point for you to be profitable and continue growing. There's a lot that goes into choosing the correct pricing that you should consider before selling.
Consider your competitors in the market, your marketing strategy, online and in-person expenses, shipping, etc. You must break down what you're trying to pay off and not just how to make a profit. The best way to choose product pricing is to just think of where you're selling, what you need in order to sell that product, and what you’ll need to continue selling.
Before diving into the pricing strategy, first research the beauty industry, the quality of ingredients that are going into your products and what they sell for, the audience you are target marketing, and the price points and strategies your competitors in the market are doing. All these elements will determine what your brand will look like and how you can fit into the industry. Will it be a more luxury, high-end brand due to your high-quality ingredients? Or will you have less expenses and want to be a more affordable option to your customer base? When you look at these competitors, you can then decide whether to match or beat them with your prices accordingly.
You want to price your products to cover your investments, expenses, and still be profitable. The best way to do this is to break these down into components to later factor in. One you have all the components that best match your business plan, you can add them together to make the perfect price point per each product.
The first component to factor in is the initial stock you have to purchase. What you originally invest into your products, you will want to make back. This means you need to make back at least enough to pay off what you purchase them for.
The second component you have to think about is where you’re selling your products, and the expenses you will have. If you are selling in-person, online, or both, you will have multiple expenses that you will need to consider to be profitable.
When Selling In-Person & Brick and Mortar...
If you are selling in-person at a shop or a booth in a market, you need to think of all the fees you will have. This can include:
- Table/booth prices
- Vendor pricing
- Rent and utilities
- Packaging and shipping supplies
- Employee labor costs
- Store/booth decor
- General liability insurance
When Selling Online…
If you are also selling online, you will have to think of the additional monthly expenses that go into keeping your ecommerce store up and running. Different websites and payment methods will have different fees such as listing prices or they will take a certain % of your income.
This can include:
- Website maintenance costs (monthly subscription fees, or web designer costs)
- Product listing fees
- Shipping/drop shipping costs
- Credit card processing
How much are you willing to spend per product to market your products online or in person? This can depend on exactly what products you’re selling and who you are selling to.
What type of marketing fits your audience? Are you targeting a niche market that’s mainly online? Think of the cost of social media advertising or PPC campaigns to get people to click onto your website and enter your sales funnel.
If you’re selling in person, think of working with local publications or other local companies who could help sponsor to help you get the word out there of your new brand. Also, look into beauty trade shows and their marketing packages. These can get pretty pricey, but there is a lot of education online on how to start out.
Reinvestment of Future Stock
To continue your skin care business, make sure to factor in the price of your next investment of your future stock. Once you sell your first set of products, or are running out, you will need to stock up on more or new products.
This price can depend on the amount you are purchasing at one time. If you are purchasing from manufacturers with a low minimum quantities, you will probably pay higher amount. If you’re first set of products sold quickly and you have confidence to invest in larger amounts, you can spend less per unit which you can adjust in your prices later on.
The final component to consider is the amount of money you want to have as profit once everything else is paid for. How much would you like to receive as your profit to make this type of business worth it to you? This can either be the price of the product you initially paid for, or whatever markup you think best suits the quality of your product in your market.
The Perfect Price Point
After doing your research on the quality of your products vs prices of your competitors skin care, you can add all your considered components that are relevant to your business model, to create the perfect pricing point.
Keep in mind that this number can be and might need to be adjusted once testing out your products in the market. Be sure to watch beauty trends and if your competitors are stealing your customers away. See what works and what your customers are telling you. Stay true to your brand and what you and your customers think your products are worth.