Sales Planning - Pricing Decisions

When a new product gets launched, a corresponding pricing decision is also initiated and handled by one or more departments in the organization. The strategy of pricing varies from one organization to another depending on their cost of labour, geographical considerations and from one industry to another.

The right pricing of a product is one of the most important factors of getting a good sales volume. There are various customers from different economic backgrounds and families. The proper pricing of a product gives a positive message to the customers. Products that are very effective in addressing customers’ needs, but are well out of their purchasing power are doomed to fail.

Before getting a final decision about pricing, teams also think from the end-user’s view about the price of the product. Pricing strategy relates mostly with the sales team, so from their perspective − it is the chief factor to achieve goals.

Seniors propose what they think to be a correct price of the product and then take opinions of the team members as well. After this, a clear picture of the pricing strategy is made. Some internal and external factors that play important roles in pricing decisions are as follows −

External Factors

• Competitors offering similar products and services.
• Government and other regulations related to a new product.
• Demands of customers for these type of products and services.
• Regulations for premium products type of a business or industry.
• The economy of the country in which the company is launching a product.

Internal Factors

• Cost of goods sold, fixed costs, variable costs, etc.
• Various shareholders’ sentiments.
• Strategies needed to increase the value of your product.
• Company's brand recognition and reputation.
• Channels of distribution from the manufacturer, distributor to the consumer.
• Sales machineries, e.g. field sales, inside sales, telemarketing or online sales.
• Nature of sales, transactional, long-term, reorder or replenish.
• Government bidding, proposal requests, foreign exchange, letters of credit.

All these factors affect your pricing policy, so it’s important to carefully consider their role in the market. You should also be aware of the skills that are necessary to deal with these kind of issues. All the internal players and their corresponding processes need to extrapolated for their effects on a future day and time.

Example

A country going through a drastic political change won’t be the right place to invest a lot of money in, as the company cannot predict the customer sentiment in that particular country.

For financial services companies, all pricing decisions are taken primarily by the marketing department. However, for services like data recovery, data storage, etc., pricing is decided by the sales department. This is sometimes done with the assistance from marketing, finance and other departments as well.