Price and Profitability
Profitability is affected by a lot of factors, especially pricing. Giving prices to your products or services is the hardest part of owning a business. Using inappropriate methods of pricing like cutting prices too low may drain out your profit. This method may not even guarantee optimum sales or purchases. Having an appropriate method of pricing for your business would not only increase sales but could earn you better profits as well.
There are lots of pricing methods that retailers could use, one of which is mark-up pricing. In mark-up pricing, you would have a pre-set percentage to the total cost of the merchandise. The price should be able to cover up for probable price reductions, discounts and anticipated expenses. If you have varied product selections this type of pricing method would be appropriate for you. SRP’s or Suggested Retail Price is a common strategy made by retailers to avoid competition and price wars. It also gives the retailer enough amounts of sales to gain profit and suffice all expenses. Another type of pricing method is multiple pricing, it involves selling multiple products having a single price. This is best for sales or discount events. It may not give you much profit, but it is proven that this method of pricing makes your customers purchase larger quantities of products. Psychological Pricing, is very advantageous for retailers for they are able to have maximum profit. This type of pricing involves prices that does not have exact values like $99.95, consumers tends to rundown prices, like $99.95 to $99 rather than $100.
Always keep in mind, that pricing needs perception. Have a feel about your customers, think of how much they are willing to spend for your product but never compromise your business’s profit. A good price is when, your expenses are covered-up but at the same time your consumers would think that the price is reasonable enough for purchase.
