What is market value?

When you sell products for your business, your pricing is critical to determining your sales and profitability. 

But to set the right prices, you’ll need to know your products’ market value, or the average amount people will pay for them. 

This value will help you strategise your pricing to set a competitive edge and stand out from similar businesses. Still, if you’re not sure what market value is, we can help. 

This guide covers market value for small business, including:

• What is market value?
• Why is market value important? 
• How can you calculate it for your business?

See also: What is psychology pricing in marketing?

Market value is the typical price something sells for within a particular industry. This price sets a foundation for the public’s idea of the worth of that particular item. 

For that reason, it’s easier to put a market value on products, as services can significantly vary in what they offer. 

To put it simply, you can estimate market value by looking at the average cost of comparable products. If there are 200 phone cases for sale on Amazon, you might see that a majority cost around £10. That’s a general market value. 

Not everything sells for market value. In fact, some businesses list products below or above the line as part of their pricing strategy. The middle line allows them to determine where to set a price point.     

The market value of an item can fluctuate over time depending on a few main factors, such as:

• Popularity, availability, and overall demand
• Changes or developments within the market
• The current state of the economy

Knowing what market value is can help you determine a starting point for pricing your products and show how much flexibility you have with profit margin. 

If the typical profit margin is about 10%, but you notice the market value is much higher, there’s room to earn more for your business. 

On top of this, setting your pricing too low or too high can lead to low earnings because you won’t make enough profit or win enough sales. 

With a clear idea of the market value of your products, you can set competitive pricing that draws in customers. 

Say you want to use a pricing strategy, such as:

• Premium – setting prices higher than the average to signal value or exclusivity.
• Competitive – setting prices lower, higher, or at level with market value to increase appeal.
• Penetration – setting prices lower than market value at the beginning to entice and grow a customer base. 

These strategies can help you increase your earnings. But to set realistic price points, you’ll need to know the average value.

Now that you understand its importance, you can calculate the average value of your products. The value isn’t always attached to a specific number but is more of a general guide. 

Additionally, remember that market value can fluctuate over time, so update these calculations every year or so. Let’s cover a few key tactics. 

The first step to determining market value for your products is to do a bit of research into similar options. So, look for listings on platforms like:

• Google 
• Amazon
• Etsy
• eBay

You could also look at larger companies or more specific shops in your market. From there, you can find listings that give you an idea of the general value. 

To narrow your search, look up keywords or products you sell. For example, if you sell shoes, look at the different types. Record a bunch of pricing options you find and gauge how popular each price is. 

Say you find 50 listings for wellies. Try adding up each price and dividing the total by 50 to get an average price. 

Tip! If you sell wholesale or branded goods for your business, your market value might be the wholesale price with a 10% profit margin. Some brands even offer a suggested retail price, which could be the market value.

The market value may be what the public is willing to pay for it, but you still need to consider the costs of producing your product. So, also add up the cost of each product. 

For example, if you purchase wholesale bowls for £4.99 each, the market value probably shouldn’t be lower. If it is, you may have higher quality goods or pay too much. 

Similarly, consider what effort or time you put into your products. If you create your own goods, such as crafts or ceramics, this hand-made element might increase the value. 

Ultimately, when you compare your products to others on the market, be sure they are truly comparable. A hand-knit sweater likely has more value than a mass-produced one. 

Considering all sides of the equation helps you calculate a realistic value. 

This article can help you understand market value and use it effectively to create pricing that appeals to customers. 

Just remember that market value is the average price of a similar product. This price can shift over time, but it lets you create a middle ground to set realistic and competitive pricing. 

As you strengthen your prices, you may want to learn more about turning those prices into earning. Why not check out our article on how to boost business sales?

It’s important to stay on top of your finances to make the most of your profits. 

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