Business Without a Pricing Strategy is a Way to Failure

Every business must be related to price. Without price, there is no business. The ultimate goal of starting a business is to have profits. Profits therefore can be consisting of three main elements which are price, number of sales and cost. If there is no price, if there is no sales then there is no profit. Your business is going bust.

Before you start a business, you should already have decided what product to develop or sell, and at what price. Usually, businessmen are thinking too much about what to offer, where to sell and how to be better than their competitors. The pricing comes on the last part of the product offering, thus the price is normally being quickly decided without enough consideration.

For new product in a new market, the cost mark-up is the most popular method. There is no need to think about pricing at all, just simply add an amount of profit on top of the cost and that is the final price. At first, the method may seem attractive but eventually the sellers will find out that their profit is not up to their expectation, and the customers are suspicious of the attractive price.

In the case where the product is already being sold successfully by the competitors, the popular way to set price is to follow the competitors' price. To make it more attractive, the price is set a bit lower from the competitors. Again, the method may seem attractive, but eventually the profit would not be up to the expectation.

These most popular pricing methods are the biggest pricing mistakes many companies have done. What they should know is to find the right pricing strategy from the start. Once the price is set, it will be difficult to change the price without the ability to predict the customer behaviour. As the market situation is constantly changing, the right pricing strategy should be applied at the right moment of time.

Pricing strategy is started from the business objective, or the reason the product is developed. Many organizations thought that to achieve the maximum profit is already an objective. Although it may sound true enough, but in the real business world, maximizing profits may not always be the goal.

Some companies do already have enough profits to cover the rest of the business operations for several more years, but it is not enough to make their brands secure better in the market. Hence they have different objectives and strategies to keep their profits sustainable and constantly growing.

It is depressing that majority of the organizations today still unsuccessfully determine the real objective when it comes to pricing. Even giant companies, who have been standing on top for decades, are still unsure of what they are pursuing whenever a new product is developed. The target is just to sell everything they are capable of creating, expecting to dominate all the markets under their grasps. The major consequence of this indecisive act, would only lead to internal cannibalization. These companies therefore would only survive in the fierce business competitions, if not drown slowly into devastation.

Mahidi_Sofian

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