Pricing strategies have been the topic of my last three posts. You can access them below:

Pricing Strategy: Extenuating Circumstances

The Effect Of Competition On Pricing Strategy

Pricing Strategies - Quantity Discounts

This post deals with a fourth important question to consider as you develop your pricing strategies:

Can You Maintain Your Prices Over Time?

I mentioned earlier that as a product life cycle matures, price usually decreases while competing products increase. So you need to expect some price devaluation over time and build that expectation into your pricing strategies.

Economic changes influence price. A recession or economic downturn can force lower prices for many products. Sometimes the downturn occurs after products are produced so the price difference comes directly from your profit. Your pricing strategies should provide contingencies for dealing with changes that detract from your profits.

On the other hand, inflation and economic upturns can have the opposite effect. Products that you produced at a lower price can then bring you a higher price.

However, profit from that higher price is often eroded by other increased costs like marketing, sales activities, and distribution. You should decide in advance if you will take full advantage of the profit potential brought on by inflation or if you will hold your prices constant for as long as possible.

This post completes my series on pricing strategies. If you’ve enjoyed this series, you can subscribe to receive weekly email summaries of my posts. Then you’ll never miss a series that you will help you. Just complete the form below:

Posted: Pricing Strategies:
Price Consistency

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Pricing strategies have been the topic of my past two posts. You can access them below:

Pricing Strategy: Extenuating Circumstances

The Effect Of Competition On Pricing Strategy

Today’s post on pricing strategies answers the questions:

• Will Prices Vary By The Amount Of Product Or Service Purchased?
• What Is It Costing You To Store Your Products?

Will Prices Vary By The Amount Of Product Or Service Purchased?

It’s a common pricing strategy to offer discounts to customers who buy in quantity, with the larger the quantity, the larger the discounts.

I’ve known of publishers who will sell for just a $1 profit per book if they can sell 5000 books at a time. Although that would provide only $5000 profit, the quick turn-around on investment can make it worthwhile.

What Is It Costing You To Store Your Products?

It costs to have money invested in a product that’s just setting in storage. While in storage, products generate no cash flow or return on investment. So an immediate $5000 profit on a $50,000 investment may be a better pricing strategy than selling for a larger profit over a course of three years.

Of course, you can always have more of the product produced and will likely get your second order cheaper than your first because the first order absorbed the set-up costs. So the second order of 5000 may actually produce an even greater profit than the first would have sold if you sold it at retail.

Thus, providing quantity discounts and selling more products quickly provide potentially profitable pricing strategies for small businesses.

To read the next post in this series on pricing strategies, click the following link: Pricing Strategies: Price Consistency.

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Posted 5-15-08: Pricing Strategies:

Quantity Discounts

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Pricing strategies will be the topic of the next four posts on this blog.
Each of these posts will answer a question that will help you with your pricing strategies.

The first question regarding pricing strategies is:

What Extenuating Circumstances Should Influence Your Product’s Price?

This part of your pricing strategies includes the exclusivity of the product, whether or not others provide a similar product, and how high the market demand is for the product.

For example, I have had Migraine headaches since my late 30’s. For years, pain pills that mask the pain for a while were the only medication available. I’d take them for about nine months, and then they would loose their effectiveness so I’d have to get off of them for three months out of every year. During that time, all I could do was suffer.

In the early 1990s, Imitrix came out. Instead of masking the pain, it actually decreases the size of blood vessels that cause the pain, and it works in about 30 minutes.

Let me tell you, there was a market demand for that product, and because it was the first product to effectively treat Migraines, the cost for Imitrix was and continues to be high, but I gladly pay it and am grateful to the person who invented Imitrix.

If you can create a product with such high market demand and for which there is no competition, you can also charge a high price for your product.

If you are not fortunate enough to invent a new product with a high market demand, you will have competitors. How they price their similar products will influence what you can charge for your product.

Thus, the market demand and the amount of competition for your product are important considerations in your pricing strategies.

To get to the next post in this series, click on the link: The Effect Of Competition On Pricing Strategy

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