How & Why to Price Your Products Successfully

Introduction

Competition, costs, demand and market trends are all examples of issues that affect how we price our products and services. Ultimately, we all set our sights on a price that will maximize our profits, but those products and services that are most successful have often made a loss before they have become profitable.

This was a result of successful pricing strategies at different times and situations in their life cycle. All pricing strategies are debatable and there are no fixed rules: good management is the key.

Successful pricing falls in-between two boundaries: the minimum, which will cover all costs; and the maximum, where demand starts to decline. Recognizing these boundaries requires good Guarantee Your Sales Growth and extensive What is Market Research?.

The Influences on Pricing Your Product/Service

Business Objectives

Many businesses price their product or service to achieve an objective. Such objectives can include:

1. Maximizing profits
2. Sales growth
3. Achieving a certain market share
4. A targeted return for investment

In which case, prices will be set high or low to achieve the proposed objective.

Costs

Small businesses, particularly new start-ups, need to cover all costs in order to survive and encourage future growth. Although most businesses will not recover costs in the short term, it is important that you set a price that will recover the costs in the long term (through continuous sales).

Competition

Perhaps one of the most influential factors, competition can have a significant affect on pricing. Some businesses have the finance and image (branding) to eliminate competition with such pricing, but for those businesses that are trying to be eliminated: they find it very hard to respond using similar strategies and consequently go out of business by doing so.