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Chapter 11: Pricing Products: Pricing Strategies

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By the end of this topic, you should be able to:

  • Identify the flaws in cost-plus and market-share based pricing
  • Understand the benefits, uses and steps for using EVC analysis to identify a maximum price for a market segment
  • Explore effective techniques for influencing price sensitivity
  • Identify the problems with a single price strategy and explore a variety price customization strategy — by customer, location, time of purchase, quantity, and product design

Good pricing strategy helps you determine the price point at which you can maximize profits on sales of your products or services. When setting prices, a business owner needs to consider a wide range of factors including production and distribution costs, competitor offerings, positioning strategies, and the business’s target customer base.

While customers won’t purchase goods that are priced too high, your company won’t succeed if it prices goods too low to cover all of the business’ costs. Along with product, place, and promotion, the price can have a profound effect on the success of your small business. Pricing is vital for both buyers and sellers. Different buyers have different perspectives toward prices and the same goes for sellers. Price can be influenced by many factors. World economics can influence pricing because consumers are greatly affected by economic fluctuations. Consumers will consider how much they are willing and able to spend within their budget. Consumers nowadays have easy access to information on any items that capture their interest. Many successful companies today create a unique product and market it in very attractive ways in order to increase the number of consumers, some even increase the product range to include a high price item.