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This is definitely a factor you cannot turn a blind eye to. With respect to normal business and
market economics, you should never price your product below its actual cost price. Your actual
product cost price is determined by the total cost of production including tax, divided by the total
number of products produced.
But in this case, I am not talking about production cost. I am talking about product development
cost; a cost incurred from research and experimentation, a cost thats usually incurred when
bringing an innovative product to the market. If you are a business owner, you should know that
newly introduced products usually command a high price. This high introductory price is based
on two reasons:
a. The first reason for the high product price is due to lack of competition. Since the product is
the first of its kind in the market place, there will be less or no competition thereby giving room
for the company to fix price.
b. The second reason is this; a high price will enable the manufacturer recover the heavy
investments channeled into the research and development of the product.
However, I have seen some company successfully use the product pricing strategy of losing on
the front end by pricing below cost price only to recoup you losses and pick up some profits from
the back end. So whatever product pricing strategy you choose; just make sure it positively adds
to your bottom line.
4. Economic trend
This is another unavoidable factor that can influence the pricing of your product. I dont even
need to stress much on this. As an entrepreneur, you should know that economic factors such as
taxation rate, labor cost, inflation rate, currency exchange rate, governments fiscal and monetary
policy will definitely influence your adopted product pricing strategy either positively or
negatively.
5. Level of market demand
This is the fifth factor that can greatly affect your product pricing strategy. Just like economic
factor, I feel this point is self explanatory. In business economics, if demand exceeds supply,
there tends to be a mad rush for the few available products, thus inflating the price of the product
and vice versa. Some companies even go as far as creating artificial scarcity in order to gain a
stronger hold on the industrial price level.
6. Demographics
The demographics of the targeted customers will indisputably influence the pricing of your
product. Demographic factors to consider before taking a stand on your product price include:
product pricing strategy will lead you to understand how to stay one-step ahead of the
competition and working your way from there. Who knows, your product price; if unique, can
give you a competitive edge.