Pricing is a key component of any marketing plan, may not be the most fun part but a surely necessary one. Every product/ service has a price, determining the optimal price is the challenge. You want to be profitable but not be overwhelming for the consumer. Your product/service could be world-class but if you have a poor price on it, you will not be able to capitalize.
Your first step should be to establish an objective for your pricing strategy. Is your objective to increase market share, profits, or defeat competition? It is important to consider these objectives because both your pricing and strategic plans have to coincide. Every step taken needs to get you closer to the objective goal.
The most famous teaching of economics is Supply and Demand. It is no stranger when it comes to pricing, customer desire for a product/service sets the tone for its price. Will customers buy more or less if you increase the price on the item? The demand more something is rarely the same for a given period of time unless it is a necessity like food or power. A constant analysis of demand will produce a more accurate framework for the pricing of an item.
Unfortunately Business can’t be all about profits and sales, costs are unavoidable. You have bills to pay and you want to make sure your prices you charge are sufficient enough to cover your expenses and then have some left over. Your bookkeeping is crucial not only for your business to proper but also for your forward moving strategy. In a world filled with increased utility costs and inflation, be sure to account for them in your pricing model. If you find out that your expenses are too high, your next step should be to trim the fat and see where you can cut costs. A thorough investigation into your spending habits and their utilization will produce areas that can be cut. An easy measure for your basic price level should be the break-even point. Where you find the price at which you can cover your expenses but make no profit.