Pricing for Profit

Pricing for Profit

Appropriate pricing will not only increase sales but also increase profits by increasing sales. In practice, there are companies that set prices with the market-oriented to be able to compete effectively, and thus market share. It was only later raise prices to earn a decent profit. Of course with the support of advertising and other promotions either above the line and below the line. Parties are required to be able to produce production-related products with the lowest possible cost.

Sometimes we realize it or not, quality is sacrificed, which can be fatal. In other parts there are companies-oriented only on cost, and prices are set by the mark-up to accommodate the desired profit. Usually one-time price set will be difficult to change any time soon because the current release of products are intimately associated with the first impression in the minds of consumers. Meanwhile, the price of the company’s goal is to get two of them; both unit sales and profits, but with the wrong pricing can actually result in loss of both.

Pricing associated with short-medium term goals or long term. Then courage in taking management decisions determine the selling price is also very involved, things are not rational and logical, but use the gut, feeling, and instinct. There are four approaches to pricing:

1. Lowest cost / lowest price: low production costs pushed to set a selling price of a cheap usually aim to capture market share in a short time,

2. Supply and demand management: demand or high usage, provides an opportunity to set a higher selling price.

3. Supplier-customer balance of power: each supplier requested a contribution to reduce the cost of production so as to provide higher gross profits to be used in competition in the market,

4. Open-book pricing and partnerships: between companies and suppliers have openness in which agreement was reached for a particular product raw materials suppliers lowered prices for other raw materials to raise prices as a whole to achieve the expected level of profit.

While other factors are also looked at external factors beyond the products and prices as well as support for marketing, promotion, technology, innovation, and it usually encourages management to set the selling price, especially when the product was first launched.