The strategy of setting price for products and services

Here's how to tackle it. Based in the Washington, D. Getty Images One of the secrets to business success is pricing your products properly.

The strategy of setting price for products and services

They might take a peek at a similar product from a competitor, adjust the price by a couple dollars, and joila — the product is ready for sale. But in the classic business world, pricing was an art form.

Pricing gurus at major companies obsessed over finding the perfect price to maximize profit from a given product or service. In other words, that Gillette razor is priced the way it is for a reason.

Not because it makes the most sense for the consumer, but because it maximizes shareholder value. So, keep in mind that a pricing conversation is really about how you will get the most value from the product or service you decide to sell.

All you really need to know about price elasticity is this: As an example, imagine this: When price increases, demand goes down. There is an optimal pricing level you can reach to make the most money from your thing.

The strategy of setting price for products and services

Cost-plus Pricing — Cost-plus pricing is an effective way to build a profit margin directly into the price of your product or service.

You may also leave money on the table by focusing on cost.

The strategy of setting price for products and services

Competitive Pricing — Competitive pricing focuses neither on costs or customers. Instead, competitive pricing is all about the existing market for your product or service. In competitive pricing, your job is to research the pricing strategies of many competitors to establish a pricing range.

The range should have a high end and a low end, and the price of your product or service should fall somewhere between those bookends so that it is competitive.

The price has more to do with the aspirations and image of the person making the purchase than anything else.

Pricing strategies that work | Business Victoria

By buying a product or service at a luxury price, we are buying our way into a club. That club is a representation of how we want others to see us in the world.

Rate-based Pricing — Also known as hourly pricing. Freelancers, consultants, and coaches most commonly use rate-based pricing for their services. The downside is that you have to trade time for money. Clients are sometimes hesitant about hourly pricing because they fear the incentive is to work more hours to make more money as opposed to being efficient.

Project-based Pricing — Project-based pricing is a flat fee arrangement agreed to at the outset of a project.

Setting a pricing strategy: key considerations for business owners

The entrepreneur may make an estimate of how many hours she thinks the project will take and then price accordingly. Or, she may combine this strategy with some of the upcoming pricing strategies to charge more. The incentive is to finish the work quickly and with high quality.

For this to work well, the scope of work should be well defined up front.To set your price to cover costs in this instance may be robbing you of profits. Deciding whether your price will attract bargain hunters, or people looking for quality is part of your marketing strategy and is important to consider.

Before setting any pricing strategy, research what the market is willing to pay or has paid for your product and similar products.

Price Elasticity of Demand

Many useful pricing strategies exist to tweak and refine your product prices, and each has its own particular set of circumstances. Setting prices can be a very challenging part of running a successful business.

You want to be competitive, but you also need to be profitable if you want to survive for the long term. How to Price Your Products: Meeting Business Goals Get Clear about Making Money The first step is to get real clear about what you want to achieve with your pricing strategy: You want to make money.

Setting a product price is an art and a science. It is both a business and a personal decision, factoring in how much you need to earn to make a living, along with your values and marketing messages.

Pricing strategy in marketing is the pursuit of identifying the optimum price for a product. This strategy is combined with the other marketing principles known as the four P's (product, place.

Let’s Talk About Pricing Strategy Setting the right price for your products and services is key to gaining profits, so a well thought out pricing strategy is a valuable tool to ensure business success. Setting a pricing strategy:
How to Price Business Services | For help on setting your break-even point how many sales have to be made before you start making a profit visit our page on calculating your breakeven point, margin and markup.
Pricing Guide: How to Price Your Products |