This article focuses on the best 11 product pricing methods in business.

Product pricing poses unending challenges to businesses worldwide.

Product pricing is the assumption of what consumers will be willing and able to pay.

Business owners do not fix product prices arbitrarily.

Therefore, you should have the customer in mind when fixing prices.

Here are some of the product pricing methods you can use.

1. Product Pricing Methods: Costs Plus Method

The cost-plus is one of the most commonly used product pricing methods you can use for your business.

In this product Pricing method, a predetermined profit margin is usually added to the actual cost of the product.

For example, if the cost of purchasing a product from a company is 100k, you can add 30% to arrive at the selling price.

This product pricing method is also known as the markup price method.

The percentage represents the estimated return on investment, also called profit.

This product pricing method is simple and easy to apply.  shops and companies commonly use it.

Related: 19 Best Ways To Dramatically Increase Sales In A Business

For best results, you must be quite clear about the actual costs of the product so that you should not under-price your product. That can negatively impact your profits.

2. Product Pricing Methods: Competitive Pricing

In this product pricing method, the marketer, sets the product price in line with that of his competitors.

This is also called a competitor-based product pricing method.

It is so-called because you will adjust the price as often as your competitor changes his price.

This product pricing method can hurt your business if you compete with a vendor with huge resources.

This is because your competitor may recover any loss on one product from the high profit made from another.

Related: 19 Strategies To Fight Competition In Business

3. Product Pricing Methods: Price Skimming Method

In this product pricing method, the marketer sets an initial high price for their product.

It is mainly used to introduce a new product to the market.

The aim is to make as much profit as possible before other marketers enter the market. The marketer will gradually reduce the price as new sellers enter the market.

Failing to do that, he could lose his customers to his competitors.

Related: How To Manage Sales In A Period Of High Inflation

4. Product Pricing Methods: Value-based Pricing Method

You can use this product pricing method based on your assumptions about the value consumers attach to the product.

The market influences how much a consumer will be willing to pay for the product.

The value the product provides for the consumer influences the value of the product.

Competitors’ prices can influence consumers’ decisions to buy.

Related: How To Retain Customers In A Business

5. Product Pricing Methods: Premium Pricing Method

You can use a premium product pricing method to drive sales in your business.

The practice here is that a marketer keeps the price of a product high to attract the attention of the rich, who often go for expensive products.

The disadvantage of this product pricing method is that consumers can easily discover the difference in the price of the product.

Consumers are always moving from shop to shop, looking for the best deals for their money.

Related: Why Small Businesses Fail

6. Product Pricing Methods: Bundle Pricing Method

This product pricing method offers multiple products as a package deal at a discounted rate.

Another way marketers use this product pricing method is to sort out products of the same category with slight differences in cost prices.

The marketer then takes the average of all the commodities involved.

Examples of these are sweets and biscuits.

The expectation is that what he loses on one item can be compensated with the profit from another product in the basket.

Again, the advantage of this product pricing method is that it saves time and paperwork.

7. Product Pricing Methods: Cost-Oriented Pricing Method

This product pricing method does not follow a specific pattern.

Product pricing is a combination of many other pricing methods.

The following factors often influence the price of the product.

• Organizational factors
• Marketing mix
• Product differentiation
• Demand for the product
• Competition in the market
• Product Supply.

The underlying strategy is that the marketer constantly keeps his eyes on the cost of production or acquisition.

In other words, it is more or less like a trial-and-error basis.

8. Product Pricing Methods: Geographic Pricing Method

Product pricing method can be based on ga geographic pricing method.

Sometimes, a marketer can fix the selling price of their product based on the geographic location of the business.

This explains why the price of a product may vary from place to place.

Sometimes, delivery costs or ease of delivery of the product to the consumer may influence the price of the product.

9. Product Pricing Methods: Penetration Pricing Method

This product pricing method is usually adopted by marketers entering a new market.

This product pricing method is often used when launching a new product in a market.

The marketer initially sets the price of his product low.

But as soon as the product gets public endorsement, he will increase the price of the product.

By this time, some of the consumers have become addicted to the product and cannot withdraw from it.

Related: Why Trading, Profit And Loss Account, And Balance Sheet

10. Product Pricing Methods: Bulk Pricing Method

You can use the bulk product pricing method to drive sales in your business.

You can use bulk pricing to offer reduced prices or discounts to customers.

Discounts enable middlemen to sell to retailers while still making their profits.

Related: How To Prevent Business Failure

11. Product Pricing Methods: Market Pricing Method

This product pricing method is widely used in the southeastern city of Onitsha, where prices rise and fall, sometimes several times in a day.

This is due to the high volume of buying and selling in the market.

Bottom Line

You should always bear in mind the actual cost of a product before you add your profit.

Where there is no price control, you can decide to have flexible prices for customers.

There are many other product pricing methods that you can use.

It is an unending race that must continue as long as businesses and human activities continue.