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Pricing and Selling

استشاري وظيفة

For your services or your products, you need to determine the right price depending on your market, the quality of your service or your offer, competition in your market...

How to calculate the selling price?

The formula is simple: selling price HT = cost + mark-HT

The establishment of the sale price does not happen randomly or by equivalence of prices by the competition: a selling price must also take into account the economic constraints of the company to provide a product or service on the market. All of these elements is the financial cost.

What is the cost?

These are fixed and variable costs of the company that enter into the constitution of a unit of product or service delivery. The cost is the sum of the following:

  • The cost of purchasing raw materials, consumables, supplies, and supplies;
  • The cost of production: time used in machinery and men to produce, but also rents, depreciation of equipment, electricity, water ...;
  • The cost of distribution: order and inventory management, packaging, procurement, packaging and transportation costs to the final customer;
  • The promotion of cost: communication load and marketing (direct marketing campaigns, advertising, posters, press, sales promotion, POS, sales commission, etc.);
  • The administrative costs: customer order management time and contacts (service, customer relations, billing, etc.).

This calculation is also applicable to service businesses. Indeed, the provision of services involves economic constraints and procurement for the provision of the service, to be taken into account to determine a selling price. Expenses to consider include:

  • The hourly or daily cost of labor;
  • Surveys the costs (communications, documentation, travel);
  • Ongoing expenses (office rental fees, electricity, etc.);
  • The service production costs (hardware, software, equipment, etc.).

Why stay alert to the sales margin?

The trade margin is the value provided by the company at cost of the product or service. His mastery is vital to ensure the profitability of your business, to improve it and register your business in an economic performance approach.

If the sales margin helps to determine the selling price, it also avoids the loss selling situations.

This brought surplus value is also:

  • Aid in making business decision: to determine a general price, a promotional price through a commercial campaign, a price of a packaged product, to achieve volume discounts or reductions to a personal customer;
  • Comparative information relative to your industry and your competition.

There is no ideal margin! According industries practices can be very different. The right margin is one that allows you to sell your products well and to ensure the continuity of your business.

The company can improve its gross margin by:

  • Increasing product selling prices;
  • Increasing the volume of sales;
  • Reducing the volume of purchases of goods;
  • Reducing the average prices of suppliers purchases.

Pricing Strategies

Price is one of the most important elements of the marketing mix, as is the mix only, which generates revenue for the organization. The remaining 3p are the variable cost of the organization. It costs to produce and design a product; it costs to deliver a product and the costs to promote it. Price must support these elements of the mix. Pricing is difficult and must take into account the supply and demand relationship. Price of too high or too low product may result in loss of revenue for the organization. The pricing must consider the following factors:

  • Fixed and variable costs.
  • Business objectives.
  • Proposal positioning strategies.
  • Target group and willingness to pay.

Types of pricing strategies

An organization can adopt a number of pricing strategies. Pricing strategies are largely based on what the company has set goals to achieve.

Penetration pricing: Where the organization sets a low price to increase sales and market share.

Skimming pricing: The organization sets a high initial price, and then slowly lowers the price to make the product accessible to a wider market. The aim is to cover the profits of the market layer by layer.

Competition Pricing: setting a price in comparison with competitors.

Price line products: the prices of different products in the same product at different prices. An example would be a manufacturer offering different VCRs video with different features at different prices. The more features and advantages achieved over the consumer will pay. This form of price discrimination assists the company to maximize revenues and profits.

Bundle Price: Beams of organizing a group of products at a reduced price.

Psychological Price: Seller here considers the psychology of prices and price positioning in the market. The seller will be charged 99c instead of 1$ or $ 199 instead of $ 200

Premium Price: the high prices are meant to reflect the exclusivity of the product. An example of products using this strategy would be Harrods, first class airline services etc. Porsche

Price option: The organization sells options with the product to maximize its revenues. This strategy is commonly used in the automotive industry.

In conclusion, choosing the right pricing strategy is important for a Freight service. The right pricing strategy will be attractive to customers and increase revenues, but the wrong strategy may turn off customers and decrease sales. Listed before the pricing strategies commonly used in business: premium prices, prices of the economy, skimming, psychological price, line price of the product, the price of captive products, bundle, promotional pricing, geographical pricing and price value . Any strategy you choose will likely have advantages and disadvantages.

Directions

  • Write a list of possible pricing strategies that are available for you. Usual pricing strategies used by companies include premium pricing (where a service is exclusive and expensive), pricing of the economy (where prices are kept low), skimming (where you charge a higher price if you a significant advantage in the market), psychological price (which target the emotions rather than reason consumers), prices of the product (which offer different services at different prices), prices in captivity products (where a high price is charged to customers who are connected to), bundle prices (where several services are grouped into a single offering), promotional prices (where special rates are used to promote a service), geographic pricing (where you charge different rates to customers in different areas) and valuable prizes (where a service is offered at a low price but with good value).
  • Eliminate all strategies fixing prices that are not possible for your freight company. For example, if you use only a small geographic area, such as in the center of a single city, it is unlikely that you would be able to use the geographical pricing.
  • 3 Write a list of pros next to each of the remaining pricing strategies. For example, beside the strategy of pricing the premium you could write it offers the opportunity to achieve margins higher prices, making it possible to be profitable with fewer customers.
  • Send a list of disadvantages beside each pricing strategies. Alongside premium prices, for example, you might note that the cost of cargo would be higher and you must be able to maintain a high level of service.
  • Select the strategy in which the disadvantages are outweighed by the benefits.

Tips & Warnings

Concentrate on the strategy in which most pros outweigh the cons. This does not mean choosing the strategy with the most benefits and least disadvantages, but considering the qualitative impact of each pro and con.