The art of pricing

Setting the price for your product is a science, although you will be having to apply a little bit of creativity. That is the art of pricing: too high and you will be losing market share, too low and you are losing the opportunity of greater profits.

If you knew the perceived value by the consumers for your product everything would be easier, right? You would be knowledgeable of the value, so then considering your costs you would set up a price that still left some surplus to the consumer, and that was higher to the surplus obtained by purchasing from a competitor. Hein?

Regretfully, this is not possible: we are not omniscient (we don’t know everything that is needed to know). However, we do have the tools that could allow us to increase our knowledge on these fairly easy equation: give me market research for having an approximation to the perceived value (of my product and competitors’), give me management accounting for obtaining the variable and fixed costs linked to the product (and the break-even calculation)… a hint of artistic essence and, voilà! We will proceed with the pricing policies.