Why is pricing important in the overall strategy of a product?
Why is pricing important in the overall strategy of a product?
When different profit levers like price, variable cost, fixed cost, volume of goods sold are compared, studies show that a 1% improvement in price can create the maximum operating profit improvement of 11.5% compared to only 2.3% through fixed costs. This goes to show that pricing can have a monumental impact on the bottom line. 

This can be achieved by understanding different pricing strategies and how they can be executed through pricing tactics. The different pricing strategy includes using - 1. Cost-side factors (like fixed, variable costs, incremental break-even analysis); 2. Customer-side factors (like Economic Value Analysis (EVA); Price Elasticity of Demand; Measuring willingness to pay) 3. Competitive environment factors. 

Based on the business context, these strategies can be implemented with tacts like price discrimination (e.g., bundling); non-linear pricing; price promotions (e.g., hi-lo pricing); and most of all understanding consumer psychology with respect to pricing (anchoring effect, decoy pricing, compromise effect, charm pricing, etc).
When different profit levers like price, variable cost, fixed cost, volume of goods sold are compared, studies show that a 1% improvement in price can create the maximum operating profit improvement of 11.5% compared to only 2.3% through fixed costs. This goes to show that pricing can have a monumental impact on the bottom line. 

This can be achieved by understanding different pricing strategies and how they can be executed through pricing tactics. The different pricing strategy includes using - 1. Cost-side factors (like fixed, variable costs, incremental break-even analysis); 2. Customer-side factors (like Economic Value Analysis (EVA); Price Elasticity of Demand; Measuring willingness to pay) 3. Competitive environment factors. 

Based on the business context, these strategies can be implemented with tacts like price discrimination (e.g., bundling); non-linear pricing; price promotions (e.g., hi-lo pricing); and most of all understanding consumer psychology with respect to pricing (anchoring effect, decoy pricing, compromise effect, charm pricing, etc).
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