From the course: Developing Business Acumen
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Define a pricing strategy
From the course: Developing Business Acumen
Define a pricing strategy
- Pricing is one of the most critical decisions an organization makes. A 1% difference on the top-line price is worth a 10% profit increase on a business with a 10% margin. For example, if you're selling your product for $100 and you make $10 per unit, that's a 10% margin. If you raise your price by 1% and go from $100 to 101, that incremental dollar drops straight to the bottom line. With that small change, you go from making $10 to $11. That's a 10% improvement on the bottom line for a 1% increase on the top line. Pricing has a huge impact on your overall profitability. You need to understand how your product or service is priced. Do you charge a one-time fee? Is it a subscription model? Do you have a razor and blade model where you sell something really cheap, but the replacement parts are an ongoing stream of revenue? Do you sell accessories or extras with your core product? Do you offer additional services or warranties? All of these pricing choices should be deliberate…
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