Many businesses give little thought to their pricing strategy. Most do a cost mark-up, and then make adjustments when the competition pushes back. Many have little or no idea if their pricing generates sufficient margin to have a profitable, growing business.
Pricing should be an intricate part of your business strategy. Are you pioneering a new market and want to lock up market share before competitors enter your niche? Do you have a product with an edge that supports premium pricing? Are you trying to penetrate an established market? Will you be selling products internationally? Each of these situations requires a different pricing strategy.
It is important to understand your target market(s). What is the buying power of your prospects? Is financing required? Who are your competitors and what do they charge for similar products or services? What differentiates your offering from the competition, and does this support premium pricing or require you to compete with lower pricing?
The good news is that if you can answer these questions and have thought your pricing strategy through, your business has a much better chance of success. Why? Because you understand your market and have a business plan. And this is the basis for creating a good pricing strategy.