RAISING PRICES

At some point, prices will have to rise but this can be a great way to add new revenue to your business and help to maintain a healthy
cash flow. Choose a time when you'll encounter the least resistance - your business's seasonality, growth stage and sales cycle
will all affect your choice of timing.

Some businesses institute regular, small increases without a formal announcement. Others keep prices the same, but change the
packaging and/or quantity of their product to reduce their costs.

In most cases price hikes are staggered to avoid alienating existing customers, the theory being that they become accustomed to higher
prices over time.

If you have more than one product, consider raising prices on some items while leaving others the same, or even lowering them. Some
customers are sensitive to the slightest price hike for a particular item while not noticing other increases. If the costs of producing your
product have risen, the customer normally accepts that the price will have to increase.

Maintain a close eye on sales volume immediately after making a price hike. If a price increase is considered too high, customers
generally react unfavourably pretty quickly. Watch your competitors too - if you've made a change in prices, competitors are likely to
follow suit.

LOWERING PRICES
If you're lowering prices, choose a time when the change will have the most impact - generally, lowering prices is not advisable unless
you are using this strategy to increase market share, have a price sensitive product or your competitors are lowering their prices.

DISCOUNTS
Discounts for certain products or services at particular times or under special circumstances can prove to be a powerful weapon.
However, used incorrectly they can backfire, resulting in significant damage to your brand, your perceived value, and your profits. A
discount should never be used as an "easy option" choice in lieu of the effort required to enhance value.

Make your discounts seem exclusive, scarce and special so people don’t take any savings for granted. Discount scarcity
generally encourages customers to move fast and could be in the form of:

 Time - time restrictions for the discount

 Quantity - how many people can access the discount
 Status – only available to the most loyal customers

Discounts should only ever be offered when you fully understand your customer acquisition costs and customer lifetime values.

For instance, if you can encourage enhanced sales by tempting your customer to purchase a less favoured item through tie-ins because
they gain a discount when bought with another, more popular product, then you’re using discounts entirely to your own benefit.
However, discounts should never be used in desperation to gain or retain customers when sales are evaporating because they can expose
the poor value you attach to your business as a whole.

CHANGING VALUE AND PRICE

A price is supported by the value the customer perceives in the product or service.

You can change the pricing and leave the value alone or you can change the value and keep the pricing the same. You can also change
both value and pricing or leave them both alone.

Many businesses get the best long-term results from increasing both price and value. Others find that they can cut their own costs while
increasing value and therefore provide an almost irresistible offer to customers.

The key lesson about value and price is that these elements can be adjusted to improve demand and increase sales without changing what
it actually costs you to make a product. Careful attention to what happens when you change pricing and value could pave the way to
solid profitable growth.

KEEP REVIEWING AND TESTING YOUR PRICES

To remain successful you need to focus on the profitability of every product you sell almost on a daily basis, which is done by reviewing
and testing prices.

For instance, try raising the price but offer a bonus or special service for customers. Measure the increase or decrease in the volume of
the product you sell and the total gross profit you generate.

You will always need to be aware of what the market is willing to pay, how your company and product are perceived – and what your
competitors are charging.
 Where did I go wrong in managing this particular employee?

 How should I give feedback to my subordinates?

 How do I handle potential assessments?

 How should I motivate people who report to me??

COST PLUS PRICING
Cost plus pricing method refers to that pricing strategy under which a company adds all costs which have gone into making a product
and then adds some percentage of profit margin to arrive at a price for a product.

ADVANTAGES OF COST PLUS PRICING

1. Biggest advantage of this is that you should know exactly the amount of expenditure incurred on making a product and
therefore you can add a profit margin accordingly. So for example if your company has incurred expenses of £100 and you
want to earn a profit margin of 10 % than you will sell the product at £110.
2. It is the simplest method to decide the price for a product.
3. Since you are using your own data for deciding your costs it makes it easier to evaluate the reasons for escalations in expenses
and therefore you can take corrective action immediately

DISADVANTAGES OF COST PLUS PRICING

1. This method does not take into account the future demand for a product which should be the base before deciding the price of
a product.
2. It also does not take into account competitor actions and its effects on pricing of the product, because in today's competitive
world if one solely depends on cost plus pricing it can lead to a failure of your product in the market.
3. It can result in a company overestimating the price of a product because this method includes sunk costs and ignores
opportunity costs.
4. Ignores your image and market positioning. Hidden costs are easily forgotten, so your true profit per sale is often lower than
you realise.

Remember, cost is only one relatively small factor to consider when pricing your product or service and very few companies should use
cost plus pricing for the reasons given above.

2016 GAS AND ELECTRICITY PRICE CHANGES

By mid-February 2016, all of the big six suppliers had announced they would be cutting prices amid demand that bill costs reflect the
falling wholesale gas prices.

The announcements kicked off with E.ON in January, and by 11th of February, all big six had committed to dropping prices by roughly
5%. However, these cuts were met with criticism for a few reasons:

1. Price cuts were around 5% from each supplier, while wholesale gas costs had dropped about 23%.
2. The price cuts only affected customers on standard plans, and the difference between suppliers' standard plans and their own
cheapest plan was more than £300 in most cases.
3. Some suppliers announced the cuts in January, but didn't implement the change until after winter was over - when customers'
energy use invariable goes down considerably.
DROP IN PRICE OF GAS NOT PASSED ON TO CONSUMER
Ann Robinson, Director of Consumer Policy at uSwitch, said of the price cuts:

“Consumers will be exasperated at yet another small cut from the big six which, quite frankly, is too little too late. Hard-pressed
customers should be seeing double-digit cuts to bills, to help stay warm and keep the lights on this winter. Token-gesture price cuts
demonstrate that loyalty simply doesn’t pay. Standard tariff customers should make their own price cut by switching to a cheaper fixed
deal, saving more than £320 a year.”

VALUE-BASED PRICING
This focuses on the price you believe customers are willing to pay, based on the benefits your business offers them. If you have clearly-
defined benefits that give you an advantage over your competitors, you can charge according to the value you feel you offer your
customers. While this approach can prove very profitable, it can alienate potential customers who are driven only by price - and can also
draw in new competitors.

You do need to be able to "prove" the benefits you are providing. Think about how much your coffee costs in Starbucks. Do you
honestly believe that it costs that much to make? And yet, you're happy to pay because you enjoy the ambience, the choice available and
the whole coffee-drinking experience that Starbuck provides. Starbucks are therefore able to reinvest their profits to make locations what
they are and where they are – and we are satisfied with this long-term value.

PRICE ELASTICITY OF DEMAND (PED)

Gathering data on how consumers respond to changes in price can help reduce risk and uncertainly. More specifically, knowledge
of PED can help your firm forecast its sales and set prices.

Knowing PED helps you decide whether to raise or lower a price or whether to price discriminate. Price discrimination is a policy of
charging consumers different prices for the same product. If demand is elastic, revenue is gained by reducing price, but if demand is
inelastic, revenue is gained by raising price. When PED is highly elastic, your firm can use advertising and other promotional techniques
to reduce elasticity.

CONCLUSION
No one pricing formula will produce the greatest profit under all conditions. To price for maximum profit, you must understand the
different types of costs and how they behave. However, a rise in your costs whould not always lead to a rise in your selling price. You
also need the up-to-date knowledge of market conditions because the "right" selling price for a product under one set of market
conditions may be the wrong price at another time.
1. People
Human resources are your company’s greatest asset and how you lead, motivate and inspire your employees can have a huge
impact on the success of your company. In People Management, learn the key leadership and communication skills that you need
to be a successful leader and build a strong organization.
People Management

2. Operations
Have you ever wondered what happens behind the scenes of a major new product launch such as a new iPhone or the latest
version of a popular video game? Managing a supply chain and making sure production meets demand under tight deadlines can
be incredibly complex and is critical to business success. In Operations Management, you will explore key aspects of business
operations including capacity planning, productivity analysis and improvement, quality assurance and the concept of lean
management. Learn about tools and techniques for managing quality, computing cycle times for operations and organizing and
configuring the various components of a supply chain.
Operations Management

3. Accounting
Proper management of the day to day accounting and finances of a business is critical to operations. In Accounting for Decision-
Making, learn about different business organizations and the role of accounting in each. You will also learn how to read, analyze
and prepare financial statements, an essential skill if you plan to start or run a business.
Accounting for Decision-Making

4. Strategy
How does your business compete in the industry? How can you create a competitive advantage? Are you able to adapt to a
changing business environment? The ability to take a high-level, strategic view of a business is necessary to identify
opportunities and to stay ahead of external forces such as new competition and changing consumer demand. In Strategic
Management, you will learn how to develop a business strategy including analyzing the competition and identifying ways that
your business can gain a competitive edge.
Strategic Management

5. Finance
The growth and maintenance of your business may require making major purchases, investments, mergers and acquisitions and
more. Smart financial planning and decision-making create value for your organization and ensure its growth into the future.
In Corporate Finance, learn the tools and techniques managers use to manage capital and maximize the value of a business.
Corporate Finance

6. Marketing
Marketing is much more than simply advertising a product or service. You must identify and interact with your customer, stay on
top of their changing needs and desires and deliver a strong value proposition. In Marketing Management, you will learn core
concepts of marketing including segmentation, targeting, differentiation, product positioning and much more. Real-world
business scenarios will be used to learn about different marketing strategies and tools for analyzing and discovering
opportunities.
Marketing Management