Setting up good pricing structures can be harder than they sound. Even the slightest difference in pricing can mean the difference between many sales or no sales. There are many things I look at when pricing out products for different businesses, but I base my pricing off of some base factors.
A few things to look over:
Exclusivity: Is the product or service a premium luxury or is it something people use on a daily basis? If any of my businesses provide a luxury service or product, I don't rip people off, but I am not jumping around giving out a bunch of deals. If you look at real life examples, you will see that if you want to buy a regular, everyday car, there will probably be some kind of "special financing" or "cash back" going on. On the other hand, if you go out to buy a Tesla, in this case, there is no special pricing, in fact, you end up paying a deposit upfront and are put on a waiting list before the car is even manufactured.
Competition: When someone is determined to buy, they are either going to buy from company A or company B. There is nothing more to it. Capturing a customer in this case, heavily relies on pricing factor. I always try to price products at all my businesses fairly and under my competition, in most cases. I don't always undercut the competition, because in ALL cases, at any of my businesses, the service is TOP NOTCH. Employee attitudes are always positive towards customers and the purchasing experience is ALWAYS delightful. Even if your prices are a little higher, you can win on service. But you should always consider what others are pricing similar products at.
Hot Product: If a product is hot, it is just that. There is no need for discounting the product. If everyone is coming to me for what I offer, I will charge full price for as long as I can and make all the profit possible.
How Quick is the Sale Executed: Time is money. If a product or service takes more time to complete, the price should definitely be in correlation with the time involved. For example, I do a lot of consulting for various companies. I charge a fixed price, in addition to per day, plus travel costs. The companies that find true value in my consulting will not hesitate to pay, other companies won't waste my time or theirs. By charging per day, instead of hourly, I can be sure that I set aside the whole day for the company that wants me to consult. If they use me for 1 hour or 3, it remains the same price.
Location: When dealing with retail business, pricing always factors in location and area demographic. The product prices for a store in Beverly Hills, would usually be higher than the same store in neighborhood with less average household income.
