When time comes for selling a product questions comes in mind how to price a product? Here in this blog we discussed in detail that you will able get insight to price your products.
Pricing is a strategic procedure to determine how much money a can company receive in exchange for a specific product or service. Appreciating and intelligent pricing is one of the most important factors in every successful business.
If your price is very high than the demand of the product will reduce so you will out of the market. If the price is too low, your sales volume may not be able to generate enough revenue to sustain your business. So price should be set at a point where you cover your business cost and get enough profit.
Whether your business is at an initial level or well established, you must be considered carefully pricing the product before selling your product or service. An established business can easily increase revenue by below discuss the excellent pricing strategy.
The most important thing to know about product cost is price.
The cost of your product or service is the total amount spent to produce it.
The price is your selling amount which adds to your margin. Price=Cost + Margin
The value is what your customer believes about your product or service and how it is valuable to them.
Different pricing strategies in business
Cost plus pricing
Cost-plus pricing is a very popular strategy in the manufacturing industry. In this, consider all material costs, labor costs, and overhead costs for your product and add your margin to set the price of the product.
Cost of material + Labor cost + Overhead cost = Total cost + Desired profit (30 %) = Product sell price
Value-based pricing
The focuses on the price you believe how much consumers are willing to pay, based on the value or benefits provided to them. Value-based pricing depends on the strength of values that you create for your customer.
Example: Apple company creates unique psychological value in consumer mind so the company can charge as per value. With the use of value-based pricing, a company can charge a margin as per value.
Demand pricing
Demand pricing is generally decided by the estimate of the volume of products and their profit. Products generally sold through a channel retailer, distributor, or wholesaler are determined by the price of the product.
The company gives the product to the dealer at a set price and after that dealers add their margin give it to the wholesaler or retailer and go onwards up to down in the channel line with adding their margin.
Competitive Pricing
Setting the price based on what price your competitors charging for that particular product or service. A competitive pricing strategy is used for similar products or services by the business owner and it varies from business to business.
This method is mostly used in commonly available products. Due to its easy availability and price fluctuation this method most help in business. For example, In fruit and vegetables, this method is commonly used. The owner checks the price of other shops prices and according to it set the price.
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