Pricing is one of the most critical aspects of any business, and can make the difference between making handsome profits and turning a loss. Evidence suggest that a 1% increase in price on average adds 11% to company profits.http://www.businessweek.com/smallbiz/content/mar2010/sb2010032_742820.htm
Pricing decisions are also complex, as they interact with branding, competitive positioning, sales levels and capacity requirements.
Many companies set their prices on the basis of adding a mark up to costs. This method often has no relation at all to what customers are willing to pay for a product or service. For example, experience shows people are willing to pay for SMS messages that cost carriers almost nothing to deliver, while they are reluctant to pay anything at all for online news, which may be rather costly to produce. A better approach is to aim to set prices that capture a product's value to customers.http://chiefexecutive.net/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=6EA8F5A0B3F0416CBA80818541594686
This page provides resources for creating an effective pricing strategy, one which sets prices at levels most likely to lead to sustained business success.
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Pricing Strategy Articles and Blog Posts
References
Fast Facts
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Fact:
According to a McKinsey study of 2,400 companies, a 1% price rise leads to an 11% increase in profits for a typical companyhttp://knowledge.wharton.upenn.edu/article.cfm?articleid=792
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Fact:
The same study shows a 1% cost reduction only raises profits by 2.3%, and a 1% increase in sales only 3.3%http://knowledge.wharton.upenn.edu/article.cfm?articleid=792
