PROVEN PRICING TECHNIQUES------------------------------------------------------------ copyright (c) Pavel Lenshin ------------------------------------------------------------
Product or service pricing on
Net is not as critical as many of you have heard, yet these pricing techniques are important marketing components and should not be underestimated.
Right pricing management accompanied with proper marketing strategy could raise your profits sky high or bring about lost opportunities and substantially hamper further development. Here I would like to share pricing techniques with you in order to maximize cash inflow and minimize happiness outflow.
Competition makes business world go round. Any product or service you desire to market should be market-checked and compared to those, which are most similar to yours. The main three parameters that should be defined and analyzed include market niche, demand and competition. The direction of your analysis and result should be:
* The developing of virtual picture of your "usual" customer; * The estimated number of monthly sales; * The exact prices of your closest competitors' products.
Pricing Policy based on Marketing Considerations.
The days, when product price was calculated by summarizing total cost of business running per product item with specified profit markup are gone and almost forgotten. This tactics is totally defective in our highly competitive world. Those, who continue to define everyday prices by that method, are stagnating with several exceptions that only prove rule :0).
The most progressive pricing policy is dictated by Market. The job of online business is to listen and implement most beneficial pricing techniques. Listen to online market or be squashed. Given your Market analysis is ready, it is assumed that you have already heard market out.
The pricing strategy usually could be two types: short-term "cream skimming" or long-term market penetration:
1. "Cream skimming" implies high price on newly invented and promoted product. The market is fresh, product is innovative and "hot". The online business cycle for that strategy is usually from 3 months to 1 year. 2. Market penetration is more appealing to majority of start-up ebusinesses. The graduate growth, business credibility building, long term prospective are main components of this pricing strategy. As a standard it implies same or lower price level that exists on market.
As it comes out from online product nature, overheads are what should be looked after closely. The total running expenditures should be summed up and known prior to stage of pricing planning.
Once you have been equipped with market research and calculated expenses it is time to define customer or retail price. You may also define discounted reseller price, client discounts and so on.
The general rule here is to have result price to be at least twice as higher than your brake even price. If your total fixed costs are 100 and your estimated monthly sales are 20 then to make your business break even you need your price to be at least 5 dollars per item. In that case your price should be not less than $10 in order to have some "price space".
