{"id":8411,"date":"2008-12-07T13:59:54","date_gmt":"2008-12-07T19:59:54","guid":{"rendered":"http:\/\/magic1host.com\/blog\/2008\/12\/07\/the-importance-of-an-effective-pricing-policy\/"},"modified":"2008-12-07T13:59:54","modified_gmt":"2008-12-07T19:59:54","slug":"the-importance-of-an-effective-pricing-policy","status":"publish","type":"post","link":"https:\/\/magic1host.com\/blog\/?p=8411","title":{"rendered":"The Importance of An Effective Pricing Policy"},"content":{"rendered":"
by Arman Sharpe<\/div>\n

A critical factor in any business is developing an effective pricing policy that will maximize profits. Maximum profit does not necessarily result from selling goods at the highest possible profit margins. There is a relationship<\/a> between the price, volume sold, cost of merchandise<\/a>, and operational expenses that ultimately determines profitability.<\/p>\n

In many cases a price increase will result in lowering the total number of sales, but this doesn’t necessarily mean lower total profits. In some case profit may actually be increased if sales volume does not drop to drastically. The reverse is also true. Lowering the price of goods will often increase the total number of sales but if sales are not increased enough total profits may be less.<\/p>\n

When it comes to making a pricing determination, the first factor you need to know is the cost of doing business as well as the product’s cost per unit. This may require some detailed research and analysis to come up with some accurate estimates. You will not be able to determine these numbers with 100% accuracy, but it should be as close as possible.<\/p>\n

Your estimates need to be accurate enough that you can be assured you are pricing your products at a profit and not a loss. Underestimating actual costs involved in their products and overhead is a root cause for the failure of many businesses. You don’t want to find out after the fact that you have actually been selling your products at a loss.<\/p>\n

The estimated cost of finished or raw materials, labor, indirect overhead, and research and development must be determined before setting the final selling price of items. These factors must be re-evaluated as costs fluctuate.<\/p>\n

The method for costing products is basic regardless of the sales and pricing strategy that is used to maximize profits. The four main categories to be accounted for are Labor Expense Per Unit, Cost of Materials Per Unit, Estimated Overhead Per Unit and Desired Profit Per Unit.<\/p>\n

You can determine an items minimum acceptable price by combining these four factors. For a more thorough explanation of these factors visit the resource listed at the end of this article.<\/p>\n

Proper product pricing is only one factor in developing a profitable plan. Another major factor to be determined once you know your costs, break-even point, and profitability goals, is the selling strategy. Three main sales approaches are used (sometimes concurrently) by businesses to develop a final pricing policy that will allow them to compete successfully in today’s market.<\/p>\n

Many considerations go into determining product selling prices. Some businesses seek to compete on price others do not by finding a un- or under-occupied market niche. This can be a more certain path to business success. The important point to remember is that all factors affecting price must be recognized and analyzed for their costs as well as their benefits.<\/p>\n

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About the Author:<\/div>\n
For a detailed explanation of how to develop your pricing policy<\/a> along with examples and the three main sales approaches most businesses use to develop a profitable pricing strategy visit the Top Business Resources Site<\/a>.<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

A critical factor in any business is developing an effective pricing policy that will maximize profits. Maximum profit does not necessarily result from selling goods at the highest possible profit margins. There is a relationship between the price, volume sold, cost of merchandise, and operational expenses that ultimately determines profitability.<\/p>\n","protected":false},"author":3278,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[87],"class_list":["post-8411","post","type-post","status-publish","format-standard","hentry","category-marketing","tag-marketing"],"_links":{"self":[{"href":"https:\/\/magic1host.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/8411","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/magic1host.com\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/magic1host.com\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/magic1host.com\/blog\/index.php?rest_route=\/wp\/v2\/users\/3278"}],"replies":[{"embeddable":true,"href":"https:\/\/magic1host.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8411"}],"version-history":[{"count":0,"href":"https:\/\/magic1host.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/8411\/revisions"}],"wp:attachment":[{"href":"https:\/\/magic1host.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8411"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/magic1host.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8411"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/magic1host.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8411"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}