If you don’t have a pricing strategy you’re in trouble. Why? Because your top competitors may have brilliant pricing strategies.
Time to catch up.
It’s a fact: If your prices are too high, you won’t land many sales. If you underprice it, you’ll make less money than you do.
To be successful, you have to discover the sweet spot – and start the process by choosing the right pricing strategy.
But what are pricing strategies, and how do they work? There are also many pricing models to choose from – which one is best for your business? Whether you’re a seasoned entrepreneur or a Budding Bootstrapper , this guide will teach you about the most popular pricing strategies and how to use them.
Cost Plus Pricing Strategy
Cost plus pricing strategy is one of the most straightforward ways of pricing.
Here’s how it works: First, you’ll determine the total cost of producing and selling your product or service — also known as goods sold (COG). This includes product sourcing, packaging, shipping, storage, marketing, overhead, and any other costs required to produce and sell the product or service.
Once the COGS is determined, you Air Transportation Email List apply a fixed percentage for profit.
The cost plus pricing strategy is mostly used by retailers who sell many physical products. It generally does not apply to more complex products or services, such as software or consulting services.
Competitive Pricing Strategy
Competitive pricing – also known as competition-based pricing – follows the velocity to market for a product or service. When using this pricing strategy, you will research the prices offered by your nearest competitors and offer your offers similarly. You can price your product at the same price, or slightly higher than your competitors.
This pricing model works best in saturated niches where consumers can opt for a similar offer due to a slightly lower price. Just be careful not CNB Directory to join the “race to the bottom” – this is where businesses continue to undercut each other in an attempt to win more business, but unwittingly provide everyone with a profit.
