An effective pricing strategy ensures value for you and your customers, and is essential for profit and growth.
Cost-plus pricing is a useful measure, but may not take into account less tangible influences. It gives you an indication of pricing levels that will cover costs and desired profit. But in some markets, you may be forced to charge less. In others, you could price much higher to increase profit or control demand.
Value-based pricing focuses on the price your customers may be willing (or able) to pay to acquire your product or service. If you offer something unique or hard to find, your value-based prices can be higher. Of course the opposite is true - if you operate in a saturated market or your competitors have a superior offering, your pricing may need to reflect your lower perceived value.
Analysing competitor pricing helps you understand what the market will bear. Comparing your products and services to those of competitors - considering their relative experience and quality - may assist you in positioning your prices to compete more effectively.
Establishing room for manoeuvre is useful for any pricing strategy. Your ability to lower prices - to win key customers or gain market share - could in the long run help achieve growth and profitability. For example, you might offer a lower price initially to get customers, that steadily increases as your product or service matures.
Deciding how to price your product or service, and knowing if and when to be flexible, are key features of a pricing strategy that will assist profitability and growth.
Learn more about pricing, and how to build a pricing strategy
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