Understanding Pricing Considerations Part 1 of 2

Pricing is one of the least understood and researched of the marketing mix. It is but one of the perception builders of a product (aka goods and services); yet at times it is seen as the primary and even worse the only perception builder.

So how do you set prices for products (goods or services)? The complex answer is it depends.

Some companies let their finance and accounting department set price by using the cost-based or cost plus pricing model. This model simply takes the cost to manufacture and deliver the product to the retailer or customer and adds on a set profit margin to come up with the price. No real consideration to the competition, local economy or customer is taken into account.

Lets take a look at what should be considered when setting the price of a product or service.

Demand: The more customers that are seeking to purchase your product or service the higher the price you can command.

Competition: Customers are always comparing your products' prices to that of the competition. In today's information age where customers can find pricing information from the comfort of their laptop, competitor's pricing should be thoroughly researched. If there is a big price gap between your product's price and your competitions' product there better be a quick and perceptible reason ie quality, size, or some other benefit.

Legal: Some countries have anti-trust and fair competition laws. If you are cutting your price to push competition out there is some risk. If you have other products and you are leveraging their profits to offset the losses of the "under-priced" product that is illegal in many developed and developing countries.

So how can you command the highest price possible. Visit us soon to learn more.