Sales pricing strategy is a methodology that is used to determine the optimum pricing that a company can charge for its goods and services. There are a number of different approaches to developing this type of pricing strategy, with most taking into consideration factors such as the cost of production and advertising, consumer demand, and the amount of competition for those goods or services in the marketplace. Using a combination of pricing techniques can often help a company determine a price range that provides an equitable amount of profit from the sale of each unit, even as that price remains within a range that is likely to be considered favorable by the targeted market of consumers.
One of the more common elements of any sales pricing strategy is to identify the cost of each unit produced. This helps to form the basis for setting the retail pricing that is offers to consumers in general, and also plays a role in offering discounted pricing to customers in exchange for a volume commitment. Simply put, if the sale price does not at least match the cost of the unit produced, there is no opportunity to achieve any real profit, even with high volume sales in place.
Consumer demand will also have an impact on the sales pricing strategy. Goods that are attractive to niche markets can sometimes be priced slightly higher, allowing the business to earn more profit off each unit sold. This is particularly true when the products in question have relatively little competition from similar products offered by other companies. At the same time, a product that has mass appeal but also faces competition from similar products that offer the same range of benefits may find that competing in terms of price as well as quality is necessary to secure and continue to grow market share.
Variables such as location of production facilities, the types of advertising required to reach targeted consumer markets, and even the cost of the raw materials used to create the products will make an impact on the exact structure of the sales pricing strategy. At its core, the strategy must ensure that all expenses related with producing the goods is offset by the revenue generated by the sale of those products. Unless the sales pricing strategy leads to cultivating demand and allowing the business to make at least some profit off each unit sold, the business will eventually fail.