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Pricing - Market in Focus

Choosing a price for your product is more that “cost price plus 20 % mark-up”

A startup business must decide the pricing for his or her product or service, but what is the best price?

Before your product or service reaches the customer, a number of cost accumulating activities have taken place. These have to be calculated and taken into account.

But also other pricing factors must be taken into consideration before choosing the optimal sales price.

Demand from target group

Your target group conditions also influence the pricing:

• What are the customer’s requirements, buying motives, and expendable capital?
• Season, trend, fashion
• The customer’s price expectations – psychological price, corporate image, price and quality, etc

Put yourself in the customer’s place, and then fix the price. During periods of low consumer expenditure, it may matter whether your product/service is a necessity or a luxury item.

If you deliver something extra you can often charge extra for your product.

Market Structure

Depending on the competitive situation in your market you must at least investigate the following:

• The general price level of the product/service
• Are the competitors campaigning on price?
• Which other competitive parameters apply?

Inter-changeability

If price is the most important parameter, then you must also consider if other products/services are inter-changeable with yours. If you sell takeaway spring rolls and your neighbor sell hamburgers then these products are inter-changeable. The customer’s hunger will be satisfied from both products.

The higher the inter-changeability, the more the customer gains from purchasing the cheapest product/service.

Read also: Pricing - Expences in focus

It is easier to ask forgiveness than it is to get permission.
– Grace Hopper, American computer scientist