A Simple Structural Framework for Understanding Price Strategies
The advance of the internet has made possible many things that were originally complex and cost intensive. One of the great revolutions in the forms of human interaction is the diminishing gap between people, even if they are physically miles apart.
This virtual proximity has gained commercial form with auctions sites and online stores. Nowadays, a small entrepreneur can start an internet business through different channels (whether using eBay or their own online store) and set a solid structure of negotiation. At these times, the need appears for guidance along the diverse concepts of sales and its applications.
In this article we will discuss, specifically, how to set an appropriate price to your products regardless of the channel you might intend to use. I have divided this process in five main themes/steps, in a way to provide the structural framework needed for a deeper reflection about price strategies in your activity.
In the attempt to reach a bigger range of topics we will consider that the negotiated products can fall under one of two main genders: (A) those produced by an industrial process or individual action; and (B) those that suffered no transformation and are being renegotiated only (which is very common in channels like eBay).
To start, we must first learn that the price of an item for sale is a characteristic dependant to five main aspects: (1) the relation profit/cost; (2) the assessment of the items time of use; (3) the defined life expectancy; (4) the packaging and advertising; and (5) the perception of an opportunity for the buyer.
- The relation profit/cost is an analysis from the vendor's point of view. It states that the final price of a saleable item must be enough to cover its acquisition/transformation cost plus a margin for profit. This last one represents your cost of opportunity for investing your time on the task of distributing and advertising your product online....
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Author: Leandro Bernardo