Having a good understanding of how pricing works in business can be a great boost to your marketing strategies. After all, nothing can kill a good deal like a botched pricing strategy. In this article, you will learn about five pricing techniques that can help you design effective marketing strategies and boost your bottom line.

The Cost-Plus Method

One of the most popular pricing structures in business is the cost-plus method. In this method, you add a markup or a mark-up to the cost of the product or service to arrive at the final price. You can use this method when pricing a physical product or offering a service in which you are the only provider in the area. When using the cost-plus method, always define the price clearly and make sure that there are no misunderstandings about what the final cost will be. This method can be extremely effective when negotiating a contract or setting the price on a products or services that you provide on an ongoing basis. The key takeaways from this method are:

• Costs for materials, employees, and utilities will not change
• Marketing and sales costs will vary
• You will earn a profit
• The customer is always right
• Be careful not to discount the product or service below its value

The Matrix Method

Another effective way to set your prices is using the matrix method. In this method, you assign a value to each of the products or services that you offer using a pricing grid. Using a pricing grid can be extremely helpful when you are trying to understand the value of your product or service in terms of pricing. You can use this method when you have several products or services to price. One of the great things about the matrix method is that it gives you a way to compare the values of your products or services fairly easily. The key takeaway from this method is:

• Establish a standard price for each product or service
• The markup or margin will be the same for all products or services
• Do not discount any of your products or services in order to make a sale
• You will earn a profit
• You can find the pricing grid for any product or service you might need online

The Revenue Method

The revenue method of pricing is widely used in the newspaper industry and it is based on how much revenue you will generate with a specific pricing strategy. In this method, you must establish a baseline or starting point for your prices and then you can make adjustments to generate more revenue. This method is also used when you are trying to sell a product or service to a new or existing customer. It is considered to be a fair and equitable method since both sides have to come to the table with some knowledge of the numbers. Using this method, you can ensure that you are not under any false pretenses when negotiating a contract. The key takeaways from this method are:

• Your prices cannot be higher than your costs
• You should establish a selling price with a minimum order quantity
• You can charge more for a larger order or for a longer duration
• You will make a profit
• The customer is not always right (your margins may be reduced to some extent)

The Discount Offered Method

The discount offered method is a way of structuring a sale by offering a discount to the customer. In this method, you offer the customer a percentage or a set amount of discount in order to make the sale. You can use this method when you have established a relationship with the customer or when you are trying to move product in large quantities or for a long duration. If you are selling a high-quality product that you do not want to devalue, then you should offer the customer a discount. If the product has value in the marketplace, then you should offer the customer a quality product at a good price. You can use this method when the customer is not aware of the costs that go into producing the product or when the customer is not aware of the costs associated with the service. As long as you offer value and quality, the customer will usually appreciate the discount and it can increase your sales. The key takeaway from this method is:

• You can offer special discounts to established or returning customers
• It is usually best to offer discounts on expensive items
• You can use this method when you want to move high quantities of a product

The Fixed-Price Method

The fixed-price method is a little bit like the discount offered method in that you set a particular price for your product or service and give the customer a discount if the price is met. This method can be extremely effective when you are selling a high-quality or rare product or when you want to make sure that the customer does not shop around for a better price. With this method, you should make sure that the price is affordable for a common person. You can use this method when you have a low quantity of product to sell or when you are selling a limited duration product. Setting a fixed price can also be an effective way of ending a negotiation since both parties know what the final price will be. The key takeaway from this method is:

• You can use this method to set the price for a perishable product (such as food or clothing)
• You should be consistent with the price (either up-front or down-the-line)
• It can be difficult to change the price once the sale is made (unless there are special circumstances)
• You can use this method when you want to ensure that the customer does not negotiate with your competitors (brand protection)

Bidding Adjacent to a Market Price

This method is commonly used in the real estate industry and it is based on how much you are willing to pay for an item versus how much a similar item is worth in the market. In this method, you start by establishing a minimum price below which you will not budge and then you go up against it. In some cases, the minimum price can be slightly higher than the market price, however, this is not always the case and you have to determine what works best for you. This method can be extremely effective when you are buying an item that has a market price that is above your budget or when you are buying a high-end item that has a comparable price in the market. When using this method, you should research similar items that you will be facing in order to establish a market price. If you are buying something that is already established on the market, then you should do some research before you make the purchase. With this method, you can ensure that you are getting the best price possible and it can also help you negotiate a better contract. The key takeaway from this method is: