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Setting the optimal price
and making correct pricing decisions is critical to any company's success.
Understanding your cost is important because you don't want to set your
price below your cost. However, you may knowingly set your price
below or at cost in order to induce customers to come to your location or to try
your product or service.
If you set your price too
high you will discourage sales unless your product or service is
inelastic.
If you set your price to
low you can create a price war where no company wins because no
one can make a profit at such a low price. If you set your price too low,
then your organization is giving up revenue and profit they could
have had.
Market
sets the price and you need to produce the product or service below that
price, outsource parts, or stop selling it.
Pricing
Articles:
- How to Stop Customers from Fixating on Price
Marco Bertini and Luc Wathieu Harvard Business Review May 2010
- Slicing and Dicing Your Pricing
Rebecca Hamilton and Joydeep Srivastava Harvard Business Review Jan-Feb
2010
- Don't Be Undersold! Jan-Benedict E.M.
Steenkamp and Nirmalya Kumar Harvard Business Review Dec 2009
- Charge What Your Products Are Worth
Venkatesh Bala and Jason Green Harvard Business Review Sep 2007
- How Low Will You Go? Mary Edie Mobley
and John Humphreys Harvard Business Review Apr 2006
- Your Loyalty Program Is Betraying You
Joseph C. Nunes and Xavier Dr Harvard Business Review Apr 2006
- Six Sigma Pricing ManMohan S. Sodhi and
Navdeep S. Sodhi Harvard Business Review May 2005
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