Various pricing strategies are incorporated in determining the price of a product. Choosing a suitable pricing strategy can be quite tasking because there is a lot that is involved in ensuring that that is the perfect price. There are four important considerations you should look at to help you rice your products.
In any good business, the costs should be covered by the revenue that will be generated. You want to make sure that this revenue is enough. You need to ask yourself how much costs you have incurred in manufacturing your product all the way to when it is consumed. Find out the exact costs. Factor in all aspects. Look at the labor, the cost of the raw material, how much was used in assembling the product? When you can tell the costs involved in a single product, then you are at a place where you know the kind of revenue that you will have to generate if you want to cover these costs comfortably.
You need to understand your customer’s financial abilities as well as their traits and their preferences. The kind of lifestyle that your customers live is an excellent pointer. It should help you decide the kind of pricing technique that you will use in pricing your products. If you have a product that does not have any close substitutes and is an absolute necessity, then a higher price will not make much of a difference because your products will still be bought.
This is one of the biggest pointers in determining the strategy that you will use to price your products. Find out if you have competitors who are offering close substitutes. Take a look at the quality of their products and their prices as well. You might set your prices high or low. Whichever the case, you still want to make sure the price says something about the quality of your products.
Economics of units
An important factor to consider is that the price that you set has to enable the business to make some profit. If you are not making profits, then it doesn’t matter how happy every department is. You might decide on a lower price which generally will increase your sales. The demand for your products will significantly rise but even in all this, if the set price is not putting your business in a position to make a profit then its all in vain.