Pricing can be like handling a big bloke on roller skates – easy to put down but a lot more difficult to pull back up again!
Although it might seem an easy way to drive more sales, setting a low price may be unnecessary as your customers may not be as price sensitive as you think and it can lead to significant lost revenue over the life of a product.
Apart from the impact on profitability, setting a low price can create other issues such as a negative impact on the perception of your brand.
Taking the following 4 steps will help you establish the right price for your product.
1. Examine your costs to set your lowest price threshold
2. To set the top of your price range, research customer attitudes and behaviour and gauge price sensitivity
3. Establish your final list price in line with your strategic objectives
4. Create an agreed customer/distributor discounting framework – be careful with overly generous quantity discounts
If you are still unsure about your customers’ price sensitivity, then set your prices higher – you may be pleasantly surprised!