When the President Asks You To Set The Price of New Software
If your president asks you to set the price of new software, how will you determine it?
Pricing is an art and can make or break your company.
You shall have the detailed information on the internal and external factors impacting your pricing before you set a 'Base Price'.
Internal factors responsible are:
1. Quality of your product. Lower the quality, lower will be the perceived price of your product
2. Cost of Production. Lower the cost of production, you can set the price lower to meet the same profitability levels. You may need to break the different tasks that contribute to your cot of your product starting from the raw materials, resources and reduce/out source those tasks that are unproductive and non profitable. Identify the breakeven point.
3. Economic Value analysis of your product and arrive at a pricing
External Factors responsible are:
1. Brand Power : Higher the brand power, higher can be your price
2. Pricing objectives of your company: Whether your company is interested in market penetration or market skimming.
If your company wants to penetrate the market for your new product, in which case you shall set the price lowest one. (market penetration)
If your company wants to target only luxury consumers, in which case you can keep the price higher.(market skimming)
3. Identify the target in which you ant to focus and the buying behaviour of your consumers.
4. Purchasing power and income of your consumers. Lower the purchasing power and income of the target consumers, lower shall be your price.
5. Availability of substitutes for your products
6. Identify your ability to analyse, monitor the Prices of your competitors and the their ability to change the prices. Identify the price trends. identify the street price and book prices of your competitors. Identify the closest competitors from whom you want to gain the market shareContinued on the next page