Pricing isn't just about covering costs; it's a strategic decision affecting your brand and profitability. Here are common strategies.
1. Cost-Plus Pricing
The simplest method. Calculate your cost for a product and add a standard markup percentage.
2. Value-Based Pricing
Based on the customer's perceived value of your product, not just its cost. High-end brands often use this.
3. Competitive Pricing
Setting your prices based on what your competitors are charging. You can price slightly below, the same as, or slightly above them.
4. Keystone Pricing
A rule-of-thumb in retail where you simply double the wholesale cost to get the retail price. This provides a 50% gross margin.
5. Psychological Pricing
This uses pricing to influence a customer's perception. The most common example is charm pricing—setting prices just below a round number (e.g., 99 instead of 100).
The Right Approach
The best strategy is often a combination. Start with cost-plus to ensure profitability, then adjust based on competitive analysis and perceived value. Use your business software to track sales data and see how different price points affect sales and profit.
