Approach pricing strategy

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

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