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Thursday, May 27, 2010

The price is right. Or is it?

All products succeed or not depending upon their uniqueness and value.

Your pricing decisions will result in one of the following outcomes:

1. Overpriced relative to percieved value

2. Priced to fully capture perceived value

3. Underpriced allowing percieve value to go unrewarded

Skuuber uniquely allows you to measure value capture at the MSRP (list price at the shelf) and at a 25% off promotional price levels. This will help you understand price elasticity of demand and whether your MSRP is at a level that captures value and whether or not price discounting will generate sufficient incremental demand to at least break even.

You need to know that a 25% price discount will require a 33% increase in unit demand to break even. If it does not, you need to consider alternatives to price discounting as a promotional strategy. These include brand building activities like sampling, demos, retail features, value-added promotions and consumer advertising.

It does not follow that price drops = profitable volume building all of the time.

Understand your price elasticity of demand, made easy with a Skuuber study.

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