Sunday, November 2, 2014


While developing pricing strategy, it is important to remember that there is an implicit relationship between price, value and volume. In developing your pricing strategy, it is also essential to recognize the dynamic market relationships between price, perceived value and volume, or quantity.

We usually will pay higher prices for things that have high-perceived value and are scarce in terms of quantity available like a limited edition Ferrari. At the opposite end of the spectrum, we expect to pay low prices for mass produced items that are not readily distinguishable among competing brands like copy paper.

Determining a value price is a little more difficult because one person's expensive, or yet another person's perception of cheap. So how do you determine the right price for your products or services? It requires taking into account all three factors of price, value and volume to achieve the right balance of all  these factors to maximize customer acceptance and your sales and profits.

Pricing is customer centric and therefore, you should not rely on what someone else tells you are good for your customers. Their customers are usually not the same as yours. Test your pricing strategies to confirm what works best for you, given your cost structure, profit goals and what your specific market will consume at various price points is essential.

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