Pricing Strategy
The pricing strategy portion of the marketing plan determining how you will price your product or service; the price you charge has to be competitive but still allow you to make a reasonable profit.
The keyword here is "reasonable"; you can charge any price you want to, but for every product or service there's a limit to how much the consumer is willing to pay. Your pricing strategy needs to take this consumer threshold into his account.
The most common question small business people have about the pricing of the marketing plan is, "How do you know what price to charge?
Basically you set your pricing through a process of calculating your costs, estimating the benefits to customers, and comparing your products, services, and prices to others that are similar.
Set your pricing by testing how much it cost you to produce the product or service and adding a fair profit for the benefits that the customer will enjoy. Examining what others are charging for similar products or services will guide you when you're calculate what a "fair" price for such benefits would be. You may find it useful to conduct a profit to seller and buyer.
The pricing strategy you outline in your marketing plan will answer the following questions:
What is the cost of your product or service? Make sure you include all your fixed and variable costs when you're calculating this; the cost of labour and materials are obvious, but you may also need to include freight costs, or selling costs, and all expenses you may face.
How does the pricing of your product or service compare to the market price of other products or services?
Explain how the pricing of your product or service is competitive. cause if the price you plan to charge is lower, why are you able to do this? If it's higher, why would your customer be willing to pay more? This is where the "strategy" part of the pricing strategy comes into play; will your business be more competitive if you charge more, less, or the same as your all market price and why?
What kind of ROI (Return On Investment) are you expecting with this pricing strategy, and within what time you will spend to get your money back?
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