Recently, I’ve read an article from Cate Costa, who is a famous blog author once wrote Tips for Pricing Your Products & Services. This is such a good article which can be easily understood and the key points are also quite useful to some young entrepreneurs. Pricing is one of the most frustrating, stress-inducing and confusing issues for new entrepreneurs to tackle. From this article, I realized that pricing is not such a simple thing since it involves customer segments and value propositions. Different types of business require different business strategies in order to maximize a firm’s profit.

In the second paragraph, Cate clearly explains the importance of balance between marginal profit and quantity demand. It states that if a firm presents its product as the luxury option, it will result in lower volume but high margins. By contrast, if a firm presents product as the bargain option, it will lead to high sales but low margins. As a result, it is important for a firm to clearly know its value proposition and ideal customers. Whether this firm intends to be the premium product or tries to compete on price with its competitors. If the products are the premium option, they need to be at the top of the price range. If they are the bargain option, it is better for this firm to be at a bargain price to stimulate its sales.

 However, this only holds true if your full branding picture – and the product itself – match up. You can’t present your new restaurant as the premium option, price the dishes that way, and then serve frozen fish sticks; nor can you attempt to be the bargain option and only advertise in the Wall Street Journal. —- Cate Costa

The reason I like Cate is because her article is fairly easy for readers to understand her main ideas even if you don’t have any knowledge about business. For the sentences above, she emphasizes the importance of matching up with product itself and branding picture. It is quite significant for a firm to position correctly itself among the mix. A misplacement of value propositions and customer segments will lead to a dissatisfied situation for both firms and customers.

In conclusion, in my opinion, when pricing the products and services, it is recommended for firms to identify its value propositions and customer segments clearly by drawing a business model canvas. It will help a firm correctly position itself among the market.

Sources:

Costa, Cate. “Tips for Pricing Your Products & Services -.” Tips for Pricing Your Products & Services –. New Venture Metor, 05 May 2015. Web. 11 Nov. 2016. <http://www.catecosta.com/tips-for-pricing-your-products-services/>.

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