The Impact of Price Popularity on Profits

The goal of almost every business owner is to generate a profit either for themselves or their shareholders. This can be challenging at best. So much thought and effort go into running a business, accounts payable, accounts receivable, dealing with vendors, customers, etc. Because of this people sometimes do not focus on one of the most important factors- pricing. Knowing how much you can charge for your product or service is invaluable information. Businesses typically want to increase volume and prices at the same time. In a perfect world that would be easy to accomplish, yet we do not live in a perfect world. So just how do businesses go about deciding how much to charge for a product or service?

One way that businesses do this is through trial and error, by seeing how much they can charge before volume starts to drop off. This is a very ineffective method, but is practiced by more businesses than you may realize. Another method is determining what percentage of profit over cost that you want. Perhaps you sell automobiles and decide that you require a profit of 5% on every car that is sold, and then you price accordingly. While this method is good for determining if you are going to cover overhead and other expenses, it may not be the best way to increase sales. A person can spend weeks trying to determine the correct price for their products and services. Economists have many formulas to determine price elasticity, market demand, and cost shifting. All of these economic formulas can be helpful, but are very time consuming and sometimes require hiring a consultant.

There are some easier ways to go about setting prices. Once you have determined a 'ballpark' price that covers your costs, you can begin adjusting it up or down to maximize profits. A relatively new concept that is garnering a great deal of attention from businesses big and small is the concept of price popularity. Price popularity is just what the name implies, looking at how popular, or how frequently a price is used. For example, surely you have noticed how many commercials on television sell items for $19.95. This is a very popular price when compared to $19.77. Do you see many products priced at $19.77? The frequency in which consumers see a price has a strong effect on their purchasing decisions.

Knowing about price popularity, and how to apply it, can help turn a slow selling item or service into a highly demanded item or service. Should a business set a price at $19.99 or $19.95? Does a price read differently to a consumer if it appears as $72.00 or $72? Research shows that it does in fact affect a consumer's decision making. Gaining access to the research that shows the most popular prices, the ones that consumers feel most comfortable with, is a precious resource to a business. This is much easier than spending the numerous hours of financial analysis to make an educated guess at what volume business will drop off if you raise or lower the price by a mere few cents.

The more a business owner knows about pricing strategies the more successful they will be in generating profits. Incorrect pricing can have devastating effects on a business. While many spend time trying to determine a break-even analysis and price elasticity, how many have really considered the psychological appearance of a price and the popularity of that price.

In today's extremely competitive business world a business owner needs every advantage they can get to outwit their competition. Researching the information available on price popularity simply puts a business one step ahead of their competitors.

About The Author

Konstantin Goudkov studies the psychology of pricing, ways to manipulate prices for maximum profit, and tactics to control consumer price perception.

You can find his latest report at: http://www.PricePointReport.com

---

The Best Entity to Hold Real Estate

Possibly THE most frequently asked question of me is "What... Read More

Pave the Way to a Successful Strategic Plan

Many very successful business owners may never have had a... Read More

In Business Planning, Competition is Good

When developing the competition section of your business plan, companies... Read More

Be Like Bill - Think!

Twice a year, Bill Gates goes to a remote island... Read More

Nine Succession Planning Mistakes Small Businesses Should Avoid

1. Attempt Succession Planning Without Other Strategic Plans. Succession plans... Read More

Business Disaster? Wont Happen to Me

As fast as you can say business disaster, your business... Read More

Do You Really Need a Business Plan?

"I don't need a business plan."Neither did Alice in Wonderland."Would... Read More

Business Process Methodologies

I've either been involved with or held a process-related role... Read More

Call in the SWOT Team: Produce More Opportunities to Expand Your Business

Have you ever done a SWOT analysis? No, it's not... Read More

During the election we heard about Ohio?s Economy

Much of what we heard in the mass media about... Read More

The 7 Critical Steps to Formulating Your Annual Strategic Business Plan

Businesses tend to avoid doing their annual business plan thinking... Read More

How to Develop a Successful Board of Advisors (...and Why You Should!)

In today's rapidly changing and highly competitive markets, many privately... Read More

Hunters and Gatherers - Are You Serving Both Their Needs?

The University of Exeter in the United Kingdom recently published... Read More

Microsoft Great Plains Implementation: Healthcare/Hospital example ? overview for consultant

Microsoft Great Plains fits multiple services market niche and healthcare... Read More

The Chasm of Change---- Restructuring ----- The Goliath

Richard L. Daft one of the country's recognized academic leadership... Read More

Scheduling of Additional Auto Detailing or Mobile Car Wash Units

If you own a mobile car wash business or auto... Read More

Mastermind Your Way to Success

What do Mark Victor Hansen, Robert Allen, Anthony Robbins, Andrew... Read More

If You Dont Focus, Innovate and Evolve, You Die

After 128 years of business, a household word, Montgomery Wards,... Read More

Bounced Checks in Your Business Location Outlets

The new check cashing instant clearing will take some time... Read More

Do You Have A Customer Identity Crisis?

The trick is to determine what uniquely identifies your best... Read More

How To Prepare A Business Plan That Guarantees Big Profits

It is always said "If you Fail to Plan, you... Read More

Abstract thought on Business Strategy and Nature

Here is an abstract thought on studying nature and the... Read More

Succession Planning for Business - 10 Key Points You Must Know

By cranking up others development to meet your business needs,... Read More

2 Simple Steps Before Starting Your Business

There is so much small business information available today that... Read More

Balanced Scorecard Strategy Map

With the help of balanced scorecard strategy map, it is... Read More

Microsoft Great Plains in Agriculture ? implementation highlights

In this small article we'll concentrate on farmers associations and... Read More

Expanding your business in a franchise system

If you are a successful franchise of a large franchise... Read More

What Every Service Provider Ought To Know About Writing A Business Plan

It's easy to lose sight of what needs to be... Read More

Water Conservation and Water Issues for Mobile Car Washers and Auto Detailers

Obviously, there will never be an actual water shortage since... Read More

Top Ten Traits of Strategic Thinkers

Want to become more strategic? Add these traits to your... Read More

Strategic Acquisition Strategies for Small Businesses

Growth through acquisition should not be considered an option reserved... Read More

Mobile Franchise Business Expansion Strategy

If you own a mobile franchise business and wish to... Read More

When Do I Need To Hire A Business Plan Consultant

Every new business owner knows that a business plan is... Read More