Setting the correct pricing strategy for products and services is a great challenge. Pricing has a tremendous impact on profits because pricing not only determines the quantity sold but also the direct contribution to the bottom line. The following are a few key points to consider when setting prices:

Set a pricing strategy

Start by setting pricing and profit-margin goals. What is your target profit margin given your expenses? Determine if you are competing on price or quality. You cannot do both because quality suffers when prices are lowered.

If you are determined to be a low-cost leader then efficiency in operations is critical; there’s no room to be wasting money on anything. On the other hand, if you are selling quality then do not compromise on price. Discounts are a good strategy if you are a low-cost leader but not when quality is your unique selling proposition (USP).

Pricing correctly should not be based on intuition. Use smart analytical tools to set proper prices. Put in place a specific pricing strategy based on the perceived value of an item to your target market. Do not make assumptions and be prepared to research and test alternatives.

Maximise profits

Any pricing structure should maximise profits. The price should be set so that profits are maximised based on the given demand relative to price. It is not uncommon for prices to be too low. This might bring an increase in demand but ultimately results in lower profits.

Setting prices too high will see decline in sales as buyers choose to shop elsewhere. The key is to price correctly so the number of units sold is maximised and therefore so are profits. Does your pricing structure maximise or impede your sales revenue? Find the happy medium and maximise profits.

Do pricing homework

Review your expense budget and price your products and services accordingly. In determining a budget, keep in mind fixed and variable expenses.

Review marketing expenses and how those are built into the pricing structure and marketing plan of a business – advertising, sales commissions, direct mail and other promotional activities are expensive and should directly impact any pricing strategy.

Review competitors’ pricing and attempt to determine their profit margin. Many businesses have very thin profit margins and others rely on debt. Have a clear plan for using debt wisely or, if fortunate enough, do not incur any debt at all.

Gain a competitive edge

Make pricing a competitive advantage by providing more value than competitors at comparative price levels. Research the competition and add value in a unique way that better meets the needs of the target market. Try to do this without increasing expenses too much and support it with service that is better than your competition. When an offering is attractive to the target market, price becomes less of a factor in purchasing decisions.

Customers are looking for fair pricing; people generally know that realise that they get what they pay for.

The most important need of the consumer is that they make a purchase believing they received a fair price for the value of the product or service. Price is equal to relative value in the minds of customers.

Prices driven down

Competition, excessive inventories and the internet are driving prices lower than ever before. Keep in mind when setting a pricing strategy that we are all forced to do more with less these days.

We have to compete smarter, focusing on customer service and knowledge-based services. In these areas, our expertise and our customers’ returns on investment will determine a fair price.

For those in sales, also remember that you must believe 100 per cent in the pricing of a product or service. Any doubt in this area will lead to customer objections on price and an inevitable loss of the sale.

Customers sense a lack of confidence and competition keeps pricing fair. Have confidence in your pricing strategy and communicate that same assurance with your customers. Price should equal the value you bring customers.

Follow these guidelines and you can set prices that appeal to customers while also aiding the business. This can only lead to more sales and improved profits, which is the reason we’re doing this in the first place, right?

More, more, more – it’s the pervasive mantra today, especially when you consider that more tech devices will improve the quality of your life, more email in your inbox means you’re a more important person and more vitamin drinks will increase your performance.

More social-media followers, friends and connections mean you’re more popular and we somehow all believe that more money will fix everything. It is important to question what is fuelling this drive for more and also where this drive is taking us.

Insatiability is more complex than it might appear – it’s natural to want more; however, the challenge and complications lie in the specific focus of our wants.

Why we want

There are both obvious and not so obvious reasons why we have particular wants. These reasons and wants, such as they are, have the power to influence our thoughts, our feelings and our actions. Ultimately, for better or worse, they also shape our vision.

More is awesome. Even the concept of more is exciting; especially when it relates to something we want.

The complication comes when the rush or novelty starts to fade and we just end up craving more in an effort to keep ourselves feeling good.

Oddly, the insidious element is often not even the actual want – it’s the concept of more, made increasingly powerful by the growing desensitisation that occurs in the process.

When you eat an ice-cream, the first one tastes deeply satisfying. A second ice-cream is still good but perhaps not as satisfying as the first. If you eat a third ice-cream, it’s possible that it’s not satisfying at all. It’s the same with anything, really.

When the value of more begins to wane, you’re left with no more than a pile of stuff and a somewhat unsatisfied feeling. You probably don’t need a shrink to tell you that this isn’t so enjoyable.

Fuelling the drive

In order to figure out what to do, we must start with the two questions posited earlier: what is fuelling your drive for more and where is this drive taking you? No one can answer these questions but you.

For every ‘want’ you have, consider the ‘why’ that lies behind it. For example, why would more email signify more importance? Does it really feel better to win that competition when you share your inbox stats with a colleague?

If it does, what does this say about your focus and values? If it doesn’t, what does this say about your focus and actions? What are you really focusing on when you discuss this and what’s the real message you’re hoping to send?

Is there a more effective way to demonstrate your value to a colleague and thus choose a more meaningful focus?

Why does having more social-media followers, friends and connections mean you’re more popular?

Might your connections and followers be more concerned about how their connectivity reflects who they are or might they possibly be just a bit voyeuristic?

Do you think they’d actually follow you offline and in real life? What if you limited your connections to those who legitimately interest you?

What if you only endorsed your LinkedIn connections for skills you can properly verify with no underlying quid pro quo in mind?

Healthy desires

More isn’t all bad. In fact, it can be healthy and sustainable providing you choose the target of your focus. Take control of this choice mindfully.

Turn off the more madness by shifting toward meaning. Rather than ‘friending’ people frivolously, consider what you hope to experience or share by connecting.

What you just might get is more value and a real connection. Instead of bragging to your colleague about your inbox, ask them what’s the best email message they received that day.

Share yours too and watch how the conversation changes. What’s the likely result? More positivity, learning and value! Keep repeating this process for every want that’s hobbled by more.

We all have a drive for more in life. Whether competing or compensating, this drive can become all-consuming. Instead, we can do many things to ensure this drive takes us some place meaningful.