Business plan pricing policy and strategy

Fostering accountability within your team.

Business plan pricing policy and strategy

A critical piece of that planning is deciding how you should price your products and services. The pricing strategy you choose dramatically impacts the profit margins of your business, and determines the pace at which your business can grow.

Several pricing strategies exist for products and services, and choosing the best for your business depends greatly upon your overall long-term business strategy. Competition Based Competition-based pricing strategies focus solely on what the competition is charging, and strive to meet or beat those prices.

Sometimes this strategy is referred to as a rock-bottom pricing strategy, or a low price leader strategy. The goal is to best your biggest competitors based on pricing alone.

As Web Marketing Today exhibits, the competition-based pricing strategy is used by many large retailers on the Internet. Because the same products are available from multiple sources, the consumer buying decision is simply to select the retailer with the lowest price.

This pricing strategy is a difficult one for small businesses to maintain, because it provides very narrow profit margins that make it challenging for the business to achieve enough momentum to grow.

Penetration Strategy A penetration pricing strategy is used as a loyalty-building or market-entry tool. The penetration pricing strategy offers a high-quality product at a much lower than expected price. This combination helps the business enter a new market even when strong competitors exist, and it builds loyalty with new customers from the beginning.

The penetration strategy can dramatically increase the lifetime value of customers, because they're "hooked" with the outstanding first product offering and--assuming future products are just as high quality--they are more willing to buy additional products from the company long into the future.

Loss Leader Also known as a promotional pricing strategy, the goal of the loss leader pricing strategy is to get new customers even if you do not make a profit from the initial sale.

business plan pricing policy and strategy

By taking a loss on the first sale, businesses can offer related products or upsells at normal prices. Despite loosing profits on the promotional product or loss leader, enough profits are normally made from the additional regular-priced products and services to sustain the strategy for the long term.

Grocery store sales utilize the loss leader pricing strategy on a regular basis. They discount one or more items on their shelves to the point of taking a loss of profit, with the intention of getting customers into their stores.

Once there, the customers are likely to buy more than just those products that are on sale.

Jun 30,  · The pricing strategy you choose for your business depends on factors such as your costs, your competitors' pricing and where your product sits in its life cycle. Pricing strategy, sales plan, marketing strategies - learn how to put together a complete marketing plan for your products and services. The Balance Small Business The Marketing Plan Section of the Business Plan. An effective small business strategy will help build your business. Use strategic planning samples or a strategic plan template; for example, a strategic planning SWOT or five forces model analysis.

High End Premium pricing takes advantage of a segment of consumers who believe high quality comes at a premium price. Instead of trying to have the lowest price amongst competitors, businesses who use the premium pricing strategy attempt to price their products and services at the highest in their market.

This strategy limits the customer base available to market products and services to, but also provides much higher profit margins for each sale.

business plan pricing policy and strategy

Originally specializing in business, technology, environment and health topics, Burns now focuses on home, garden and hobby interest articles.

Her garden work has appeared on GardenGuides. She enjoys practicing Permaculture in her home garden near Tucson, Ariz.Pricing is so important a subject in your small business environment that it has its own section on this website and it is also covered in several other areas (strategy .

Create an investment-worthy business plan with our template builder. Download into Word or PDF for free. We ask the questions, you fill in the answers. Pricing strategy, sales plan, marketing strategies - learn how to put together a complete marketing plan for your products and services.

The Balance Small Business The Marketing Plan Section of the Business Plan.

How To Write a Business Plan | Small Business BC

Encyclopedia of Business, 2nd ed. Pricing Policy and Strategy: Or-Pr. Managers should start setting prices during the development stage as part of strategic pricing to avoid launching products or services that cannot sustain profitable prices in the market.

One of the toughest decisions for a startup is how to price their product or service. The alternatives range from giving it away for free (like Twitter), to pricing .

You know you should be taking a focused approach to your growth strategy, but aren't sure where to begin. Thankfully, we can help you get started right now!

Pricing Strategy