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.

Demographics

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

Leave a Comment

Your email address will not be published.

You may also like

Growing a Business

Want Great Guidance ? Find yourself a Super Mentor

post-image

They are the gods of small businesses, those inspired individuals who have achieved the highest levels of success. They can be the shining beacons who light up the path of running your business with their vision, wisdom and wealth of resources and contacts. They are The Mentors.

If you are fired with the passion to take your business to great heights, the best thing to do is find yourself a super mentor. Here are some tips to help in your quest

Pinpoint your Need

Sit down and focus your thoughts on your business growth strategy. Which area of the business needs a lift. Is is staffing, is it the finances, is it the production, is it the your lack of customers or is it the business as a whole that needs a makeover. Once you’ve zoomed in on the sore spot, this is where you need…

Read More
Growing a Business

Dreaming Big? You can Move Mountains with these Business Productivty Tips

post-image

You may be full of admiration for some people who seem to manage themselves and their work so usefully and efficiently. They seem to fit in so much productive work into the same number of hours which everyone has.. Let’s look what makes them tick and take a few tips.

Learn to identify your most productive hours

Its true, most productive people know which time of the day they can be most creative and efficient. They identify and allot these hours for the best part of their work. This way they are able to give their 100% awareness to the job and business productivity.

Early to rise- A winning habit

Waking up early is a personal habit that has all the plusses on its side. You need not necessarily go to work that early. It’s a habit that gives you more time for personal care, like mediation, exercise, walking,…

Read More
Growing a Business

Leadership Qualities that can make you an Icon

post-image

You may have reached the leadership position through sheer dedication to performance and a do or die attitude . Now that you are at the top, your viewpoint needs to change. You have to now be a role model, one whom others will look up to and follow. Here are some tips that can shape your leadership and management skills

Be Competent: Employees will look up to a leader who has good industry knowledge and management skills. If you do not possess these skills you should surround yourself with knowledgeable people who can offer good counsel. Competence is a trait all employees will admire.

Be Trustworthy: No one will look up to a person they cannot trust. Your employees will want to rely on you and count on you. In difficult situations, leaders are expected to apprise their employees of the situations and find solutions on how to address…

Read More
Raising Money

Are You offering Your Services Using the Right Pricing Strategies?

post-image

In these times of fierce competition, business people , mostly those that offer services and belong to the service based industry, are finding it a challenge to implement the right pricing strategies. It is virtually a struggle to set the right business price that will retain and attract the customers, and not drive them away. Follow these tips, the crucial dos and don’t s and you may be in a much better position to offer your services at the best price.

Maintain your Business identity and Dignity

If you are offering a unique or special product or service, don’t underrate it just because you want to build a better relationship with the customer. This will just cheapen your offering as another run of the mill. If its something special you are offering the customer, then communicate this fact to the client and get the equation right with the most…

Read More
Raising Money

What is a Fair Wage? How Do you Assess Fair Wage?

post-image

How do you figure out a fair wage?

This is a very common question for startups and small businesses. They can’t seem to decide or understand how to set wages and manage reputations at a time. They are determined to pay well but they also have to think about encouraging their employees to stay with them for a long time. This is why there is a need to think strategically.

Listed below are a few expert tips to help you decide:

Don’t Focus Only on Money

Money should never be the main focus for you or for your employees. You should decide on the wages in such a way that your employees are tied to your business. When your business does well they should be able to taste that success and vice versa.

Also, think about additional perks such as exclusive benefits and time off. Many employees value this more than the overall…

Read More
Raising Money

Tips to Winning Hard Negotiations With Ease

post-image

While some negotiations are easy, others are quite hard to win. If you stumble you will lose.

Whether it is a potential client or an investor, negotiations can be very tough and frustrating. The problem is that the moment you let your frustration overwhelm you, you will lose the deal and you will give in to whatever is being offered to you. In order to avoid that, here are tips to overcome tough times and to win even the hard negotiations:

Research!

Know your opponent as well as possible. This is the rule no matter what you do. You should understand your opponent to the T. Who the person is, what his culture is, what he thinks, what he stands for, how is his network, etc. are the questions you should ask yourself and answer through research before meeting up for the negotiation. Understanding the opponent will give you a great advantage.

Walking…

Read More