9.5 Tips on pricing and price strategies

Lately had quite a few people reach out to me with queries on pricing strategies. Here are 9.5 tips for you if you’re responsible for pricing in your organization. This is not meant to be a comprehensive list, but should give you useful pointers if setting price is part of your day-to-day work.

1. Dropping price is easy. Raising it back up is often near impossible

2. A 2% price increase would, on average, lead to a 15% profit increase for FTSE 100 companies

3. Demand-driven price will always bring bottom line improvement than supply (cost) driven pricing. So create demand

4. If you’re launching a new product, do no employ a Price Penetration strategy without proper research on demand elasticity

5. Wherever possible, bundle services such as after-sales support that enable you to set a higher price and create customer stickiness

6. When setting price take all costs – fixed cost, variable cost, out-of-pocket cost, opportunity cost etc. – into consideration

7. Do not fall prey to the tendency of transferring product cost-downs immediately to price-downs

8. If you’re running a Small Business, consider the ratio of your fixed cost to variable cost, vis-à-vis your competitors when setting price

9. If you are an International operating in emerging economies, keep a close tab on your FX rate to prevent price and profit leakage

9.5. Always do a Break Even Analysis and set volume commitments towards your Account teams (and to your Customers, if necessary)

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