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The ideal price for any product or service is one that is acceptable to both buyer and seller.
From the buyer's standpoint, the right price is a function of product purchase value and other competitive choices in the marketplace.
From the seller's viewpoint, there are many potential pricing objectives. But the basic concern for almost all small businesses is to price products to maximize both sales and profits, while providing enough margin to take care of applicable marketing and overhead expenses.
The following steps are recommended for determination of product pricing for any size business:
- Analyze the size and composition of your target market.
- Research price elasticity for your product.
- Evaluate your product's uniqueness.
- Select your channels of distribution.
- Consider product life cycles.
- Analyze your costs and overhead.
- Estimate sales at different prices.
- Consider secondary pricing strategies.
- Select final pricing levels.