Pricing of a product determines if the maker or manufacturer would make money or lose money. It also scripts whether a company would succeed in selling that product or fail to convince people. If a company can get its pricing right then it has very little scope for failure but if the pricing is not right then there is absolutely no chance of success.
The below infographics provides the dynamics and strategies behind setting pricing and determining market value.
Understanding the Dynamics of Pricing
Innumerable experts, market watchers, researchers and entrepreneurs have worked relentlessly to understand what pricing is, how it should be approached and what is the right pricing for a certain product. In the slideshow, The Science of Pricing, you would come across strategies that can help you to understand what pricing implies and how you should price your products.
You cannot opt for a super expensive pricing that people wouldn’t be happy with. You cannot go for super cheap pricing as that would make you lose money. Economic pricing is often not conducive to profit and your venture would run into losses, sooner than later. You cannot go for predatory pricing either. Besides, you cannot opt for exactly the same pricing as that of your competitors because then customers would actually have no choice based on economics. You really need a unique pricing model which attracts people, keeps your breakeven point comfortably covered and allows you to keep growing as a business.
Strategies That Help
These can be achieved if you study the strategies discussed in the slideshow and implement them efficiently. Pricing has to be determined not just based on the cost factors but also based on what people are looking for. How much would a person pay for the kind of product or service you have to offer? Judge it based on the level of urgency, whether it is a luxury item or consumer good, how much competition there is and how many alternatives, better or worse, the customer has.
Look at Comparative Pricing
Along with that inference, you need to understand the law of comparative pricing which is basically pegging multiple price points for the same product or similar products so people get to choose the pack that best suits their budget. This also allows you to smartly put in the desired price between a higher price point and a lower one so people go for the median which is also expected to be of better quality than the cheaper variant and close to the more expensive variant.
Pricing is science and if you have a methodical approach then you would get it right.