Raising Money

7 factors that influence your product pricing strategy

The level Of Competition, most entrepreneurs fancy the concept of selling their products with a very high margin. This idea can only be realistic when you have a monopolistic hold on the market. But if not, you can’t sell with your desired profit margin without getting a sting from competition.When trying to adopt a product pricing strategy or determine the right price for your product, the issue of competition is a factor that must be trashed out effectively.

The more intense the competition in your industry is, the more flexible your product pricing strategy and policy will have to be.

[sws_blockquote_endquote align=”left” quotestyle=”style02″]Defeat your opponent by strategy and flexibility.[/sws_blockquote_endquote]

– Sun Tzu

The point being stressed here is this if your competitor sells the same product you are selling but at a lower price, it may affect your business negatively. That is why a feasibility study or business plan always includes an opposition or competition analysis section. Never implement your product pricing strategy without first putting your competition into consideration. Pricing your product without giving a heck to your competitor’s product pricing strategy is a sure way to business failure so don’t do it.

[sws_blockquote_endquote align=”left” quotestyle=”style02″]The ultimate goal of the Dangote Group is to dominate every niche in which it operates. In order to achieve this goal we acquired over 3000 new trucks, developed a strong distribution network and increased production capacity. Our strategy is to sell our products faster than our competitors and at uniform price.[/sws_blockquote_endquote]

– Aliko Dangote, The Richest Black Man in The World

Perceived value of your product

This is another factor you must take into consideration before setting a price for your product. Your first step is to ask this question “what is the perceived value of my product in the heart of the customer? You must strive to find a good and definite answer to this question before fixing a price for your product.

The reason perceived value is a critical factor to consider in a product pricing strategy is because customers often associate low price with low quality.

Meaning, if your product is priced too low, the customers tend to feel the materials used in producing the goods is inferior and so therefore, the product is of low quality. So before fixing a price for your product, make sure you strike a balance between the price of your product and its perceived value.

Product development cost

This is definitely a factor you cannot turn a blind eye to. With respect to normal business and market economics, you should never price your product below its actual cost price. Your actual product cost price is determined by the total cost of production including tax, divided by the total number of products produced.

But in this case, we are talking about production cost.

We are talking about product development cost a cost incurred from research and experimentation, a cost that’s usually incurred when bringing an innovative product to the market.

If you are a business owner, you should know that newly introduced products usually command a high price.

This high introductory price is based on two reasons:
a) The first reason for the high product price is due to lack of competition. Since the product is the first of its kind in the market place, there will be less or no competition thereby giving room for the company to fix price.

b) The second reason is this a high price will enable the manufacturer recover the heavy investments channeled into the research and development of the product.

However, some companies have successfully used the product pricing strategy of losing on the front end by pricing below cost price only to recoup you losses and pick up some profits from the back end. So whatever product pricing strategy you choose just make sure it positively adds to your bottom line.

Economic trend

This is another unavoidable factor that can influence the pricing of your product. I don’t even need to stress much on this. As an entrepreneur, you should know that economic factors such as taxation rate, labor cost, inflation rate, currency exchange rate, government’s fiscal and monetary policy will definitely influence your adopted product pricing strategy either positively or negatively.

Level of market demand

This is the fifth factor that can greatly affect your product pricing strategy. Just like economic factor, this point is self explanatory. In business economics, if demand exceeds supply, there tends to be a mad rush for the few available products, thus inflating the price of the product and vice versa. Some companies even go as far as creating artificial scarcity in order to gain a stronger hold on the industrial price level.


The demographics of the targeted customers will indisputably influence the pricing of your product.

Demographic factors to consider before taking a stand on your product price include:
a) The age bracket of the customers you are targeting
b) Your business locatio

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