The pricing strategy analysis is crucial to the business plan and equally to daily business operations: it outlines a very important part of how you do business. The perfection of this analysis goes far in determining the success of a business. Properly establishing your price with thorough consideration of cost and competitors can mean the difference between success and failure for your business. If your prices are too low, you will be setting yourself back from startup. Below is the process for writing a pricing strategy analysis.
Things You'll Need
- Cost of goods sold budget and/or projection
- Competitive market analysis
Preliminary Pricing Analysis
Determine all the costs involved in providing your customer with your product or service. This means evaluating direct costs, the supplies that you need immediately to complete your work as well as indirect overhead costs, which include your administrative duties as well as general supplies. Refer to your inventory and/or cost of goods sold projection or budget.
Research the prices of your competitors. Your competitive market analysis should have uncovered no less than three main competitors in your industry. Gather a clear picture of their prices.
Review your marketing strategy and decide if your competitive advantage includes a lower price than your competitors.’
Establish your price floor and price ceiling. Your price floor is the lowest price that you could offer above cost; your price ceiling, the highest the market can sustain.
Compromise with low prices and high profits. Find a way to meet or beat the competitors’ price if it is part of your marketing strategy.
Completing the Pricing Strategy Analysis
Examine and explain the advantages and disadvantages of per project, per hour and per retainer pricing structures for your business.
Write the pricing strategy analysis in a few sentences that explain the basis of your decisions and your contingency plans in case of market changes.
Establish why your pricing strategy will be successful. Also explain how you will measure your success and improve your pricing strategy.