5 Rules For Pricing

Pricing a new product is one of the most complex issues producers face, particularly when selling to a mass-market. Price a product too low and you could be losing out on important margin. Price it too high and, of course, you won’t sell as many as you could. The whole process can get more sophisticated with the introduction of discriminatory pricing — like charging different prices according to type of day, version of the product or type of customer.

Nick Coster, Managing Director of product management consultancy BrainMates, has five rules to consider when arriving at the price of a product:

  • the price needs to be higher than the cost
  • the benefits need to be higher than the price
  • price is driven by supply and demand
  • the business needs to be clear on its pricing goals
  • pricing is a strategic activity not to be confused with short term offers

Nick explains each of these rules in this edition of BTalk and I throw in an example of pricing I devised for a client years ago, as a demonstration of how you can get imaginative with pricing structures.

First published on CBS News


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