Of all the marketing problems you face in launching a new product, pricing is the most important—and the most difficult!
If your new product costs you, say, $45 to produce, and you sell it for $69, your profit—what you can take home with you—is $24.
If you sell more of your products, the profit is reduced by your costs of making the extra products. For example, you get an extra sale that brings in $45, but only $24 of that is actual profit.
Ask most businesspeople what they could do to dramatically increase their profits, and their answers are usually:
All three strategies would probably sell more products, but they are risky. The first two will increase your costs—for which you hope to then get a payoff in increased sales and (hopefully) profits. The third strategy will lower your profit margin, so you’re earning less per unit sold.
Yet these three answers miss the most obvious way to dramatically increase profits: a price raise.
Let’s analyze what is best for profits—10 percent more sales (units) or a 10 percent higher price.
If you are currently selling $100,000 worth of ...