Pricing a Product

I have always wondered how one can make the "right" price for a product. I would think it is one of the toughest jobs to do in the industry. Many times I'm sure consumers would question whether a certain product is worth the price it is given. Or, how can you tell what a product is worth when it comes to pricing? But we need to stop watching just the view on the outside of the product and realize the tight spot marketers are in when it comes to the strategy of pricing a product.

Four(4) basic steps followed when setting price:
1. Costs. Focus on your current and future, not historical, costs to determine the cost basis for your pricing strategy .
2. Price Sensitivity. The price sensitivities of buyers shift based on a number of factors and your pricing strategy must shift with them.
3. Competition. Pay attention to them, but don't copy them . . . when it comes to pricing strategy they may have no idea what they're doing.
4. Product Lifecycle. How you price, and what value you provide for that price, will change as you move through the product lifecycle.

Strategic pricing is the effective, proactive use of product pricing to drive sales and profits, and to help establish the parameters for product development. Used wisely it is a clearly powerful tool for successful marketing strategies.