My Suggestion Use Pricing Tactics In Business

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TeamPlayer

Yellow Belt
Different tactics can help you attract more customers and maximize profits.

Discounting

Discounting your prices can be a very effective tool. Perhaps a clearance discount to sell old stock, a discount for making multiple purchases of the same or similar products, or you could offer bulk discounts to encourage larger orders. You should be able to make these more profitable through lower costs.

Warning! If you offer too many discounts customers may question your full-rate pricing or see you as a cheap option. When you want to go back to full pricing you may find your customers aren't too happy.

Odd value pricing

There's little difference in real terms between an item selling for £2.99 and one at £3.00. This tactic is often used by retailers, where perception matters. Even on larger items like TVs, a price of £299.00 is more appealing than $300.00, or for a motor car £12,995 is better than £13,000.

Loss leaders

There are exceptions where you can sell and make a loss. This is when you sell an item at a low or even loss-making price. Although you may not make a profit selling this product, you could attract customers who will also buy other, more profitable products. Loss leaders in a retail outlet are often placed near the door to entice customers inside.

If you have something that others don't - a unique product or service - you can sell it at a high price. This is known as skimming - but you need to be sure that what you are selling is unique. Otherwise you may just price yourself out of the market if there is credible competition.

The opposite of skimming is penetration - starting at a low price and gaining market share before competitors catch up with you. Once you have a loyal customer base, you should be able to find ways to raise prices later.

Increasing or decreasing your prices

There will be times when you need to change your prices. But before you do, you should analyze the impact on your profitability of any proposed price change.

There are two key questions you will need to answer:

* What effect will the price change have on the volume of sales?
* What will the effect be on the profit per sale?

Increasing prices

Price increases are a way of life, and if you have to raise them there are certain things you need to do.

Always explain to your customers why you are doing it. If every other supplier of the same product or service is doing it, you'll find it easier to explain away your price increases. You can use the price change as an opportunity to re-emphasize the benefits you offer. Strengthen your relationship with your customer by being upfront and honest about your increases.

You could introduce new, higher-priced products or services and make older, cheaper ones obsolete. Or, lower the specification - and your costs - while maintaining the same price, thus your profitability is increased.

Decreasing prices

This should never be done lightly. Low prices often go hand-in-hand with poor-quality service, so you could be reducing your profits and conveying the wrong message to your customers. That isn't to say if you sell well known products and you buy them in at a lower price you can't pass that reduction on to your customers. They may be short dated, for example, and you may want to get rid of them within a certain time. So, you charge a lower price and your customer benefits, and you still make a good profit, possibly encouraging a higher volume of sales by charging less.

Most of the time though you should work on building profits rather than cutting prices to build up sales. Generally your customers buy from you because of the benefits you offer, along with your price. It is rare for the decision to be made based solely on the price.
 

stevenricherd

White Belt
The strategy mentioned by you in the post is right, and these small tips if kept in mind can lead to huge profits for the company.
 

extomas

Yellow Belt
I would like to tell that discounting isn't good way to promote if you use it often, because it makes your profit less and making angry your suppliers.
 
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