pricing an important strategy
As we all know pricing is an important strategic issue because it is related to product positioning. It affects other marketing mix elements such as product features, channel decisions, and promotion. There is no single recipe to determine pricing. But, it will depend on several factors like product, distribution, and promotion decisions and so much more.
When setting a price, seller must consider the production costs. These costs consist of both the fixed and variable expenses to manufacture or offer your product or service. Fixed costs include rent, salaries, property taxes – any expense that doesn’t change often. Variable costs fluctuate depending on the amount of goods produced or services provided that includes raw materials, hourly wages and sales commissions.
Then, research the willing of the customer to pay for the product. Know the competitors price. You can charge higher if you offer better product or service than your competitor. But, before that you must evaluate your product’s uniqueness. Consumers will not pay higher if they can pay less for the same product.
Then, determine the product’s price elasticity. The product’s elasticity is determined by whether price changes result in changes in demand. The greater the price elasticity, the closer you should price your products to your competitors’ products. It is only then you can set a price if all these factors are taken into consideration.
However, once in a while businesses give out discounts on their products to encourage increase of sale. Like the discount cigar, this will invite cigar user to buy more of the product during the sale period as people are always on the hunt for a good bargain. Quality products and reliable services at an affordable price, with additional value is the winning formula that increases sales. Always keep in mind that discounts losses you money. It is better to know when to give and when not to give discounts.
