Step 1: Investigate the company.
- How big is it? What products does it have, and is it the market leader in this field?
- What’s the business model (sources of revenue) of the company?
- What’s the cost structure of the company? What are the principle cost charges?
- Is it in charge of their own pricing strategies or is it reacting to suppliers, the market and competitors?
Step 2: Investigate the product.
- How does it compare to that of the competition?
- Are there substitutions or alternatives?
- Where is the product in its growth cycle?
- Is there a supply-and-demand issue at work?
Step 3: Determine a pricing strategy.
Three main pricing strategies to think about:
- Competitive analysis
- Are there similar products out there?
- How do our products compare to the competition?
- Do we know the competitor’s costs?
- How are they priced?
- Are there substitutions available?
- Is there a supply-and-demand issue?
- What will the competitive response be?
- Cost-based pricing
- Break-even point
- Price-based costing
- What are people willing to pay for this product?
Source: Case in Point, Marc P. Consentino