The pricing structure
A pricing structure consists of a base (or list) price and a variety of price modifiers which depend on the type of product you are selling and the type of market in which you operate.
The most common price modifiers are outlined below:
Quantity discount – an incentive to buy more.
Settlement discount – an incentive to pay quickly.
Promotional discount – a discount for a specific period of time.
Seasonal discount – an incentive to clear seasonally sensitive stock.
Cash rebate – an after-sale incentive linked to a specified target.
Ranging allowance – paid to a reseller in return for them stocking your product.
Promotional allowance – for participation in a promotional campaign.
Delivery fee – an amount you charge for delivering the product.
Credit card fee – an amount you charge on credit card purchases.
At the end of the day, your objective should be to achieve the best possible price for your products or services taking into account:
The value they provide for your customers – ie: how they satisfy their needs and wants in terms of features, benefits, utility value and prestige.
Your cost structure – what is your break-even point and how much profit do you want to make? Go to the Financial section for more information on calculating your break-even point and determining profit targets.
The competitive environment – what do your competitors charge for similar products and services?
Your competitive advantage – do the products or services provide advantages that warrant a price premium?
The economic and market environment – what is the level of demand in your industry?