In the world of retail, few things matter more than obtaining a significant bottom line that rewards investors with a substantial profit.¬† Not only does making a profit hint at the fact that there is a need for your business in the industry, but it also says that there‚Äôs a possibility for you to continue your success into the future.
One detail that is key in obtaining a profit and continuing your
success is utilizing the proper pricing structures.¬†
By integrating pricing optimization strategies and monitoring competitor pricing, you can take advantage of the major positive impact that pricing can have on your potential profit.¬† Here are a few pricing solutions that you can strategically use to price your product or service so that it will bring about maximum profit.
Determine the Value of Your Product or Service
How much will your customer pay for your product or service?¬† Before you discover this answer, you must first think about what draws the customer to buy your product in the first place.¬† Is it a necessity item or more of an impulse purchase?
For example, if you are selling video-hosting software, you must determine whether customers are drawn to the quality of your video software or to the amazing upload ability.¬† Understanding how consumers view your product or service requires research.¬† Start by considering the following:
- What problem does your product or service solve?
- Who is it solving them for?
- What makes your product superior to the competition?
- Is your competitive advantage sustainable?
Understanding the answers to these questions will give your product purpose, as well as a target audience who will be most inclined to purchase your product.
Determine a Reasonable Fee
Now that you understand the value of your product, you need to find out just how much a consumer from your targeted audience is willing to pay for your product or service.¬† Some possible modes of acquiring this information include:
- Consumer Surveys:¬† Surveys customized for your target audience will allow you to see what consumers like about your product, as well as what makes them want to use it.¬† These surveys can go further to ask how much the consumer would pay for your product or service.
- Consumer Testing:¬† You may want to send a trial product out to some key consumers in your target audience and ask them to actually test your product.¬† After allowing them to use your product for a specific length of time, you can then ask them what they liked and didn‚Äôt like about it.
- Focus Group:¬† Much like consumer testing, focus groups bring several consumers in from your targeted audience in order to give their feedback about the product or service.
Other Details to Consider:
After you find out how much your consumers are willing to pay, you can factor in other details, such as:
- Cost of Your Product:¬† How much does it cost you to make your product?¬† This is essential in formulating your price.
- Underpricing and Overpricing Strategies:¬† Pricing your product too low will negatively affect your bottom line, while overpricing will deter consumers from purchasing your product.
- Sale Negotiations:¬† If your products require negotiations, you must have the knowledge needed to win the negotiations and collect the sale.
Pricing software is a great tool for developing a systemic approach to pricing optimization and¬†discovering the perfect pricing strategies for your product.¬† While pricing is somewhat of an art form, having quality software walk you through the process can dramatically increase your chances of success.
Erica Anderson¬†is a data evangelist¬†and likes to help businesses get ahead using meaningful data.
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- Pricing Optimization: How To Maximize Sales Effectiveness - July 8, 2013