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5 Metrics That Can Help You Price Your Products Better

April 26, 2021
Price Products

Price is the perceived value that brands place on a product or service. It is arrived at after doing complex computations, understanding your customers and what they are willing to pay, and external factors such as how the economy is faring and how much a buyer would be comfortable parting with. 

It would help if you also weighed in how much your competitors are charging for similar products or services so that you can have a competitive edge.

Brands need to be careful when arriving at their product prices because this could either make or break their businesses.

Charles Toftoy, a management science associate professor at George Washington University, acknowledges that pricing is probably the most challenging hurdle to cross for effective marketing. “Pricing is part art and part science,” he says.

You charge too low and you will not cover your cost of operations and so on, you will be closing the shop. On the other hand, if you price your products too high, your customers might shy away and opt to buy products from your competitors who are fair in their pricing.

That said, though, one big mistake that businesses make is pricing their products too low. It could be that they want to seem like the brand offering the best low-priced products in a competition. 

But at times, this turns out to be disastrous. Customers could dismiss you as offering dirty, cheap, and low-quality products. They will therefore avoid you like the plague.

On the other hand, overpricing could make you come out as unreasonable and therefore not attracting the masses.

5 Metrics that can help you price your products better

Below are five metrics that you need to weigh in before you arrive at your products or services prices.

1.    Return on investment

For every business venture that an organization invests in, they should be in a position to measure their return on investment (ROI). The return on investment is measured in percentage as the profit margin you are getting from a business operation. Therefore, you will first compute the total revenue you are getting less the cost of operations divided by the cost of operations.

Return on investment= (revenue-cost of operations)/cost of operations*100

This metric will determine how to price your products and services. The pricing should be so that one can cover the cost of operations and get profit. 

If your pricing does not give you a profit, you have no business continuing in your operations. You could as well close shop or look for something else that will guarantee you a return on your investment.

Case study

In betting, a sports bettor should be able to calculate the return on investment that they will get to determine whether it is alright to place their bet.

Sports insights advise that you will need to compute your return on investment when you are placing a sports bet wager to measure your investment risks compared to what you are making. Without calculating your ROI in sports betting, you will always be losing money and at the end of the day, you will have made nothing.

According to, bookmarkers don’t only rely on probability to set their odds. They make sure they cover every outcome and balance the odds so that they’ll earn a profit regardless of the outcome.

2.      Cost of customer acquisition

How much are you paying to acquire a customer? Are you getting value for that customer? These two questions will guide you on how much you need to charge your customers for your products or services. 

The cost of acquisition will be determined by the amount of money you invested in getting that one customer through your marketing efforts. 

It could be that you got them through search engine optimization, paid ads on social media or that you paid a media personality to be your brand ambassador.

Case study

Most sports betting firms pay celebrities and media personalities as their brand ambassadors for a few years. They also rely on media ads to reach more customers. The firms should calculate the cost of acquiring a single customer by dividing the amount of money used in marketing by the number of customers they get.

Draftkings spends at least $371 to acquire a single customer. They pay media influencers to entice customers in the hope that they will become loyal customers who will wager enough money so that they can recoup this cost of acquisition in the lifetime value of the customer.

3.      Cost of operations

Organizations will usually have monthly recurrent costs to meet, such as rent, paying staff, and taxes. All these costs of operations will play a prominent role in how you price your products or services.

Case study has listed 15 gambling sites that went bankrupt after they were unable to meet their operations costs or were involved in some irregularities. Had they done good pricing, they would probably not have gone under.

4.      Brand position in the market

The position of your brand in a market largely determines how you are going to price your products. There are three positions to look at that determine how you are going to price your wares.

a.       Penetrating pricing

When you are penetrating a new market, you want to price your products as low as possible so that you can gain visibility, reputation, and trust among your customers. You also want to get an edge over your competitors. Once you have established yourself as an authority, you can place higher prices without necessarily losing customers.

b.      Premium pricing

When you are the number one trusted brand, you can set premium prices for your products since customers who want value and quality will still come to you. Sports betting firms that have given out high-value winnings to their customers are highly likely to up their joining prices without necessarily losing customers.

c.       Skimming pricing

When you are the only brand in the industry and expect that competitors will step in to try and give you a run for the money, you can price your products highly to lower them when competitors step in. This way, you will have made headway in your returns way before other competitors step in.

Case study

Looking at sports betting firms that gave out the best winnings, you will find that they tend to charge higher for their memberships since they have already made a name through the big winnings they have paid out.

d.      Psychological pricing

You have probably seen a product priced at $8.99 and it seemed as though the price was near $8 rather than $9. Businesses need to charm their customers with enticing psychological prices.

Wrap up on metrics to weigh in before arriving at your pricing

Pricing is an important aspect determining your market share and how customers will be willing to uptake your products and services. 

While pricing is no rocket science, it needs to be done delicately, not to overprice or underprice your products. You need to realize that you are in the market to make money and as such, you have to try as much as possible to maximize your profits.

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The site shows you live odds from a wide range of sportsbooks while at the same time giving you statistics about how teams have performed in the past so that you can make an informed decision while doing your sports betting.