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Essential Steps In Setting Price For A Product

When setting the price of a new product, marketers must consider the competitions prices, estimated consumer demand, costs, and expenses, as well as the firms pricing objectives and strategies.
Here are the steps on how to set a price for your products:

Step 1: Determine Pricing Objectives. What is your purpose in setting a price for your product? Do you want to increase sales volume or sales revenue? Establish prestigious image for your product and your company? Increase your market share and market position? Answering these questions will help you keep your prices in line with other marketing decisions.

Step 2: Study Costs. Since the main reason for being in business is to make a profit, give careful consideration to the costs involved in making or acquiring the goods or services you will offer for sale. Determine whether and how you can reduce costs without affecting the quality or image of your product. This is so true for a company that quality product is the main service. For instance, a digital printing service shop can higher their price in their postcard printing service if it really has higher quality compared to others.

Step 3: Estimate Demand. Employ market research techniques to estimate consumer demand. The key to pricing goods and services is to set prices at the level consumers expect to pay. In many cases, those prices are directly related to demand.

Step 4: Study Competition. Investigate your competitors to see what prices they are charging for similar goods and services. Study the market leader. What is the range of prices from the ceiling price to the price floor? Will you price your goods lower than, equal to, or higher than your competitors?
Step 5: Decide on a Pricing Strategy. You may decide to price your product higher than the competitions because you believe your product is superior. You may decide to set a lower price with the understanding that you will raise it once the product is accepted in the marketplace.

Step 6: Set Price. After you have evaluated all the foregoing factors, apply the pricing techniques that match your strategy and set an initial price. Be prepared to monitor that price and evaluate its effectiveness as conditions in the market change.