Before you decide to buy anything, what do you look at first? PRICE. How much an item costs often determines whether or not you buy it. If it costs too much, or if it doesn’t cost enough you’ll probably talk yourself out of buying it. The price of your product has to be right for you to, first of all, break into the market, secondly, maintain your position, and thirdly, produce profits. Look into as many pricing strategies as you can. It will help you convince investors that you’ve chosen the right one.
Here are some questions you may want to consider:
- What is your product’s general pricing structure?
- Why have you chosen this format for pricing?
- How do you envision your pricing strategy changing over time?
- What is your gross profit margin between manufacturing and ultimate sales costs?
- Is this margin big enough to allow room for distribution and sales, warranty, service, amortization of development and equipment costs, and price competition?
- Will your price enable you to get your product or service accepted, maintain your market share in the face of competition, and, above all else, produce profits.
- How much are you selling your product for?
- Is this price higher, lower, or the same as your competitors’? Why–newness, quality, warranty, service?
- If your product is priced lower than your competitors’, how will you make a profit–efficiency in manufacturing, innovative distribution, lower labor costs, lower overhead, or lower material costs?
- What is the relationship between your price, market share, and profits? For instance, a higher price may reduce the number of sales, but still result in a higher gross profit.
- What is your discount policy?
- Will your customers get a discount for prompt payment or volume purchases?
- What are your present and long-term goals in pricing?
The great thing in this world is not so much where we are, but in what direction we are moving. Oliver Wendell Holmes.