When setting the price for your company's goods and services, how much time do you spend really understanding the importance of this task? Do you just take a look at your competitors and price accordingly?
Price setting is one of the most undervalued parts of business marketing there is. It's definitely something you should take seriously and adhere to winning price setting methods, price setting economics, and price setting strategies.
It's quite advisable to incorporate a firm price setting strategy that's going to maximize a plan that will equate to a more robust bottom line and profit margin.
It's equally advisable to hire a company or incorporate business software -- which has CPQ features (Configure, Price, Quote) -- that will provide your marketing strategy with an edge to help you stay a step ahead of your competitors, not to mention please your customers and clients.
These types of variables can and will lead to more sales and a better profit margin.
First, you need to understand what price setting is, and what are the best price setting methods, price setting economics, and price setting strategies for you to adapt and implement.
Examples of Price Setting Methods You Should Know About
To get into the nuts and bolts of most price setting methods, a marketing or economics degree may be necessary. But don't fret, we'll try to explain in layman's terms the basics. And with the basics, you'll gain an understanding of why you'll need an expert company to help you with these price setting methods.
There is a multitude of price setting methods most businesses put into use today. The list includes: cost-based pricing, demand-based pricing, competition-based pricing, cost-plus pricing, markup pricing, value pricing, target return pricing, going rate pricing, and transfer pricing.
While we don't have the space to explain in detail each of these price setting methods, we'll give you an example of one. Cost-based pricing, for example, is where you take a set percentage of what you'd like to see from the desired profit and add this to the cost of the service or product.
Importance of Understanding Price Setting Economics
Understanding and implementing price setting economics principles is an important part of your marketing strategy.
Price setting economics entails a company's ability to make sure to set prices within certain limits of a demand curve when it comes to goods and services.
Being able to incorporate price setting methods can make or break the profit potential you have within your individual market. Too high one way or too low in another can have a direct and sometimes debilitating effect on your ability to compete.
Price Setting Strategies, Which Way Should You Go?
When it comes to settling on the right price setting strategies for your business, it may be best to incorporate a variety of strategies, instead of just one.
Hiring an outside business to help implement winning price setting strategies is most advisable, and you'll also want to learn about the fabulous CPQ computer software available, as well.
Some businesses may like price setting strategies such as price skimming (or creaming), which allows you to set prices designed to have less pressure on sales. Or contribution margin-based pricing, which is where the price is set determined by the difference of the product or service and the variable costs.
These are just a couple of examples, so now's the time for you to do some research, learn what you can, and find a company that can help you achieve the goals you desire.