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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. Your products can be priced strictly based on financial considerations, or you can use prices to differentiate your company from your competition, or send a message to your customers about quality.
Cost and Margin Your price needs to be sufficient for you to recoup your costs and to earn a little extra in profit. It should cover both direct costs, or the materials and labor that went into producing the item, as well as indirect costs, or expenses such as rent and utilities that you incur to keep your business running.
Direct costs make up a fairly consistent percentage of the price you charge. For example, if you operate a food service business, your food costs should average around 33 percent of your price and labor costs should average around another 33 percent.
The percentage of your price that goes towards indirect costs decreases as your volume increases. Competition Before setting prices, do some research to find out what your competition is charging.
If your products are very similar, then a lower price can give potential customers a reason to choose yours over the other alternatives.
If your product is of noticeably higher quality, a higher price will reinforce this fact, and can even make your offerings more desirable.
If money is the bottom line for you, try pushing the limits to see what the market will bear. References 2 Restaurant Business Online: In she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative.
She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.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.
Sep 29, · Odd pricing of products and services with digits ending in 9 ( for example) is a form psychological pricing.
Colors Another variant of psychological pricing uses different colors in advertising based on their perceived psychological impact/5(5). Popular price points: There are certain "price points" (specific prices) at which people become much more willing to buy a certain type of product.
For example, "under $" is a popular price point. For example, "under $" is a popular price point. Sep 25, · Try using a pricing structure that offers “good,” “better,” and “best” options for products or services that have increasing levels of value.
Applying this strategy can help you capture a larger portion of the market by offering multiple options for a range of shoppers/5(22). Apr 24, · This is a pricing strategy that revolves around pricing a product or service low enough so that it attracts customers and captures market share.
Once the product is established in the minds of the consumer, the price can then be raised.5/5(5). Published: Tue, 26 Sep Introduction. Pricing is a basic and interesting topic in the business.
This paper will be described the strategy of setting prices for products and services; especially it will focus on one specific strategy called price discrimination, which is to charge different prices to different customers for the same or similar product and service.