Introduction
Running a successful business depends greatly on Pricing Strategy. When prices are too high, sales suffer and when prices too low, profits suffer.
Yet, when prices are just right, a product can Drive Sales, Bolster Profits, Enhance Brand Value, and Ensure Long-Term Success.
So, how does one can determine the elusive "RIGHT PRICE"? Let's explore.
Determining an Optimal Return Ratio
After analyzing numerous reports, we found that businesses maintaining a 12% to 15% Customer Returns Ratio are profitable.
You may wait for your Customer Returns to get normalise till they less than 25%
But, if your Customer Returns are higher than 25%, you may try any of the three options :
(1) Reduce the Price (if costs allow), or
(2) Improve the Quality of the product or
(3) Discontinue the Product (because anyway the customers don't like the product at the given price).
Let's understand with an example
Consider this scenario, where a customer buys a product for Rs. 500 but after receiving the product, the customer returns it because the customer thinks that the product is not worth Rs. 500. But if the same product was priced at Rs. 300, the customer may not have returned it.
However, if Customer Returns Ratio is below 10%, it may be considered that the product is highly valued by the Customer. This allows you gradually increase the price, which in turn will give you higher margins. (However, this must be done very carefully otherwise it may spoil the business.)
Note: The above stategy cannot be applied to non-returnable products
The Business Scorecard : A Tool for Business Monitoring
To ensure ongoing profitability, utilize tools like The Business Scorecard Reports. These tools offer comprehensive business analyses, facilitating informed decision-making.
To get reports, visit www.businesscorecard.com
In essence, pricing isn't merely about numbers; it's about striking a delicate balance between cost, value, and profitability. By understanding these dynamics and leveraging appropriate tools, businesses can navigate the pricing maze and thrive in competitive markets.