Learn: right pricing strategy for your product/ service
Most businesses struggle with pricing. Urvashi struggled with pricing, and eventually had to shut the restaurant. Pricing is one of the…
Most businesses struggle with pricing. Urvashi struggled with pricing, and eventually had to shut the restaurant. Pricing is one of the most difficult things to crack. Which one is apt? HBR recommends two most common ones.
One, cost plus
First add all the fixed and variable costs. Then add a mark up to the total cost. Mark up ranges from 8% to 800%.
If one limits the ceiling, it helps to gain trust like Costco ( it limits mark up to 14–15%)
Simple pricing helps small businesses to decide the price, without complex calculations.
Read more: HBR ( 3 free articles)
Two, value based pricing?
It’s about hitting a particular segment or category. It’s common for the products with features war, such as mobile phones.
The goal is to charge more for differentiation.
Read more: HBR ( 3 free articles)
Book worth reading: How to Price Effectively: A Guide for Managers and Entrepreneurs