The Pricing Game Part 2

Setting a price, in and of itself, is pretty straightforward. It cost A, you want to make profit B, so you set price C. There. You’ve set a price.

Developing a pricing strategy, on the other hand, takes a bit more work. It is a step-wise process, that, when done properly, puts you in the best position to hit the right sales volume, revenue and profitability.

  1. Get a sense of the appropriate price range for your product (value, mid-price, premium).
  2. Establish a few price points within that range to test.
  3. Test your different price points against your competitors and with potential consumers.
  4. Set your price.
  5. Give it time, then repeat.

The most challenging part of this process involves the testing. Ideally, you’ll be able to predict how your competitors will react to your various prices—undercut you, go head-to-head, move prices up, do nothing. This would require you to know your competitors pretty well. You know, that whole keep your friends close and your enemies closer sort of thing.

Failing that, try different prices over various periods. For instance, use price X for two weeks, price Y for the next two weeks, then price Z for the two weeks after that. Evaluate your sales and profit and decide on a price.

Alternatively, you can set your price high on your range from step 1 above and discount it to various prices below that, finding which price level works best.

While this approach to pricing takes time and effort, it will give you greater confidence that your price is targeted to your consumer and matched well to the product itself.

Read The Pricing Game Part 1.

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One Response

  1. […] The Pricing Game Part 2 The Pricing Game Part 2 While this approach to pricing takes time and effort, it will give you greater confidence that your price is targeted to your consumer and matched well to the product itself. Read The Pricing Game Part 1. more… […]

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