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Executive Summary: Developing A Pricing Strategy

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SUMMARY: DEVELOPING A PRICING STRATEGY
Developing a pricing strategy for a market is important when introducing new products. Firstly, it is essential to determine how to evolve a company. Small businesses need to follow a pricing strategy as well as gaining financial control. The key aspect to develop such strategy for a particular market is to maximize the sales of the products to get profit.
After developing a pricing strategy, then begins the process of marketing of the product. They are both vital in topping up the sales. It is also important to identify what kind of product to sell in order to determine the type of business.
The first type of business is volume driven where prices can be manipulated up and down. Questions are asked whether …show more content…

This type of business is suitable for small business and is widely used. Fixed overhead are costs needed in order to operate a business and if it is less than 50% of sales revenue then pricing makes a huge difference in making profit.
For this strategy to work in the market a market survey is carried out and analyzed. The target consumers or customers to be served are researched. Deep and close studies are carried out and particular items that are on the market are compared. The prices can be the same in different areas but competitors are selling at higher prices. Undeniably the lowest price product will be looked into compared to highest price product. The action of determining the highs and the lows is crucial in positioning a business or a product in the market …show more content…

WHAT OBJECTIVES SHOULD THE STRATEGY SEEK TO ACHIEVE?
Setting a new product’s price is tricky as there are no precedents to acquire information from. If the price is set too high, it can have adverse effect on sales volume and if the price is set too low, the sales revenue might not cover the costs. So to establish the price of a new product entrepreneurs can choose from three strategies: penetration, skimming and life cycle pricing.
 Penetration
For a new product to be successful, it must penetrate the market where a lot of similar products are in competition to get accepted. The introduction of new products at a low price can quickly create a mass attention. The margin between the price and the total cost is slim and quickly reaches high volume of sales. The objectives here are to enter the market at a faster pace, level up the sales volume as well as building a market share.

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