9+ SAMPLE Product Price Proposal

What Is a Product Price Proposal?

A Product price proposal is a preliminary offer for the price of a potentially marketable product by a contractor. It’s a document that establishes product sales that the developer will charge before estimating the potential costs that will be incurred as a result of finishing the manufacturing of a certain product. Your price suggestion for the product must be clear, concise, and readable. It should include both direct and indirect expenses associated with marketing the product, as well as evidence that you provide exceptional value for any money spent. You can check out the price proposal sample for additional reference.

Determining a Fair Price Point

Lumen Learning states that price is important to marketers because it represents marketers’ assessment of the value customers see in the product or service and are willing to pay for a product or service. You have various methods to analyze the statistics when comes to pricing products. However, finding the right method may require some trial and error. Setting a price plan for a new product or service is indeed a crucial step in the development process. Pricing should be considered as soon as you decide to pursue a concept because it will define how much you can manage to spend on the project.

Value-Based Pricing: Value-based pricing is one of the most effective approaches to determine your prospective price point. It’s a pricing technique that companies employ to price their products and services at a level that they believe customers would accept. A value-based pricing strategy takes into account more than just the cost of production plus a fixed markup. It can be tough to get a sense of that figure. Customer profiling, market research, and Data Analysis are all necessary steps in determining how much you should charge for a specific service. Don’t be tempted to lower the price in an attempt to acquire the business. Competitive Pricing: Competitive pricing entails setting prices that are comparable to those of your competitors. You can respond by setting lower, similar, or significantly higher prices once you know what it is they are charging. If you choose to sell at a greater price than your competition, make sure you can justify it with a money-back guarantee or a relatively high product or service. Competitive pricing has its drawbacks. If you simply compete with the other competitors in your market, you may not be able to cover your production and administrative expenses. Rather than being the primary focus, competitive pricing should be a part of your overall strategy.Cost-Plus Pricing: Many companies utilize cost-plus pricing as their principal pricing approach since it is one of the simplest ways to establish prices. It concentrates on the cost of manufacturing your goods or services. You may ensure that your operational and manufacturing costs are covered by using cost-plus pricing. It works effectively for companies that sell real goods or when the competitors follow the same concept. It isn’t a good fit for service-based businesses, whose products often provide more value than the cost of Production. Another issue is that it ignores the customer’s desire to pay as well as the potential value of your goods. 

Product Price Proposal Strategies

You may start thinking about how you might utilize price to enhance your market share by knowing about the pricing techniques which other company owners are utilizing today. This curated list goes through pricing strategies that you may utilize to collect and retain more leads. Keep in mind this does not mean you are restricted to them alone. Many company owners will change their approach or combine different tactics over time. A variable pricing strategy may be required for one product or service than for another. With the following tactics, it simply takes a little trial and error to discover which ones work best for your company.

Price Skimming: When you use a price skimming strategy for a new product or service, you start with a high price point and gradually lower it over time. This is an excellent strategy to attract customers, particularly profitable shoppers who consider themselves trendsetters. From the standpoint of a business owner, price skimming can be incredibly beneficial in helping you break-even quicker. Given that your initial price isn’t too high before making your product or service more accessible to the larger market, this technique gives enough protection. The rest of the market will be looking for reduced charges as long as you keep your online corporate reputation during the initial release phase.Penetration Pricing: The total opposite of penetration pricing is price skimming. Rather than starting with high prices, you begin with low prices and gradually raise them as your business grows. While this puts you in danger of making a small or no profit at first, depending on how low you go, it also converts quickly. You are delivering a reduced experience to generate customer loyalty in the same way that a free sample can inspire a customer to make a buy. Penetration pricing is intended to draw attention to your brand. Your prices will always be lower than those of your competitors, to begin with.Competitive Pricing: The purpose of competitive pricing is to move your target demographic away from your competition and toward your brand. Instead of raising prices later, you’ll continue to monitor what your competitors charge and undercut them. Although this strategy might be difficult to maintain, which is why many business owners prefer a penetration pricing plan, competitive pricing can be effective if one of your specialties is lowering production costs. It will retain price-conscious customers devoted to your company because it consistently helps them stay on budget. Economy pricing is similar to competitive pricing because it relies on low production costs to keep prices low over time.Premium Pricing: Low costs aren’t always the most appealing proposition. When your intended audience prioritizes quality over price, you must demonstrate the benefits that your company can offer. From the start, a premium pricing plan can help you increase the considered value of your product or service. Your costs may decrease significantly over time, but they must still convey exclusivity and elegance to your buyers. While premium pricing is sometimes linked with luxury brands, any brand can use this strategy. Certain companies, for example, constantly charge a premium for their products, even though generic pain relievers are just as effective.Loss Leader Pricing: Customers are drawn to several Retailers, both online and offline, by marketing a single, heavily discounted product or line while encouraging them to buy more. As a result, your company will earn a bigger profit each transaction. Though this pricing approach is frequently connected with promotional pricing, it can also be used in the long run. Bundle pricing is a classic type of long-term loss leader pricing, in which you offer greater discounts to customers who purchase more. Although offering discounts for bundling won’t immediately raise your profit margin, the idea is that you will obtain more consistent sales.Psychological Pricing: You may not realize it, but the data you see have much more influence over you than you realize. Rather than changing consumer views of a product, psychological pricing aims to change perceptions of what the price is in the first place. When used in conjunction with charm pricing, you can reinforce a customer’s perception that they are paying substantially less. Customers can see how much they are saving by putting an initial price next to a sale price. A psychological pricing strategy is ideal for companies targeting price-sensitive customers since it offers the illusion of a bargain that luxury-conscious purchasers may not want.Value Pricing: Value pricing considers how valuable, high-quality, and important your items or services are to your customers. You must have a thorough awareness of your target audience’s needs, pain points, and motivations, as well as your brand’s reputation, to create value-based rates. Consider how the market’s position affects people’s views of value. While emphasizing value pricing as a separate strategy, it is always encouraged to consider value, even if it’s not your primary method. This can assist you to reduce risk by ensuring that when price skimming, you don’t start with a price that’s too high or underestimate yourself with competitive pricing.

How to Make a Product Price Proposal

After going through all the curated lists prepared for you in this article, you are more than well-equipped to begin preparing a price proposal letter that will contain all the necessary information before presenting it to the respective reader. But it is not easy to think of the appropriate contents while being pressured on the time and deadline the document is required. This is why the article provides you with various samples and templates that act as a helping hand in assisting you further. Moreover, with the guide below, you can define each section of what to input in the document.

  • 1. Professional Details

    As for the first step, you will have to state the professional details regarding your company. This refers to the official company name, the logo you are using, the address, and contact information that is linked to your Company. You should also include a company description with regards to what your company does and a brief history to give readers, both those familiar and unfamiliar with your product to be more aware of what you can provide. By presenting and providing this information first and foremost, the readers will appreciate being informed ahead of which company you are associated with. Which also acts as a cover letter.

  • 2. Market Value of Product

    Various products are available in the market and it is quite rare for a product to be unique and not have any similar functioning products in stock. So investors or customers may not turn to your direction right away, especially if you are selling something that is already widely known in the Market. This section of the proposal defines the actual value of the product in the market which will help readers of the proposal be aware of why you chose to produce the specific product. Don’t worry if you run out of space because the next section will help out this part.

  • 3. Elaborate on the Product

    This next section is to further explain and provide a foundation on why you chose to sell that product in the first place. As mentioned, you will have numerous competition and it could be risky to market your product when customers already have a brand they opt to purchase from. You can list in this step how beneficial your product is and how it could be advantageous when purchased. Whether it is additional health benefits or an environmentally friendly material, you can further explain it here.

  • 4. Pricing List

    Finally, this section is the most important for this particular type of proposal. As the name states, you are providing the pricing of the product you are selling which means this is the part where you may end up stuck or having to think over for a long time. Prices may not be easy to set right away and you may need to change or adjust them once in a while. But the important thing is you should Research so that you can set an appropriate price which will pique the interest of the customers and also not scare them away from purchasing it.

  • 5. Terms and Condition

    As any proposal cannot be completed without discussing and agreeing on the terms that both parties will need to be committed to, you cannot forget the terms of the agreement section. This section will lay out the necessary responsibilities and actions that should be fulfilled by both sides. The terms states must not be taken lightly and instead, both would have to commit to it. You can also define your company’s Price List with regards to how the payment will be handled and the period in which the completed amount will be transacted.

FAQs

Why are brand products more expensive?

As mentioned above, certain customers will prefer a product sold by a more well-known brand than a common product. Since store-brand goods are less expensive than name-brand alternatives, there is a prevalent misunderstanding that they are of lower quality but this is not the case. One reason name-brand items are much more expensive is that marketing those products to the general public takes money. Consumers pay the price for commercial jingles, pamphlets, billboards, and other forms of advertisement that ingrain themselves in their minds. The majority of store-brand products are designed to closely resemble their name-brand counterparts.

Why is a pricing strategy important?

Pricing is crucial since it determines the worth of your product for both you and your clients. It’s the quantifiable pricing factor that tells clients if their effort and cash are worth it. Your pricing methods may have an impact on your long-term profitability. It turns out that presentation is the key to a convincing proposal or estimate pricing. You can present a price in an exceptionally persuasive manner and win over customers, or you can present the same price differently and never make a sale. Without a pricing strategy, you could end up costing your company in the long run.

What is a price proposal?

Not to be confused with a product price proposal, a price proposal is how you set your pricing rates to a customer or client on how you charge to provide them a service on your skills and experience. It’s critical to understand the difference between a pricing proposal and an estimate. Estimation is a best-guess figure for the cost of a project to a potential client. A price proposal is a comprehensive document that includes accurate raw material, labor, tax, and other general overhead expenses quotations. It often includes a company’s suggested markup and is given in competitiveness with other competitors bidding on the same project.

Proposals were meant to persuade and convey to the reader what you, regardless of whether you are a freelancer or associated with a company, can offer them. In this case, as a product price proposal, you are meant to convince your client, customers, investors, or generally the readers of what you are offering the market and how much you are putting the price on it. It is important to set the prices before even planning for a sales proposal letter because a thorough budget equates to adequate profit.