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It is always a joy for me whenever I have the opportunity to participate in the Steemit contest weekly and today I will be participating in the crypto academy community contest. Stay tune below.

When it comes to pricing, I have come to understand that it is a very important aspect of the business that must not be joked with because it goes a long way to determine a whole lot of things in the business. It determines the profitability, the customer perception and also helps to know the market competitiveness. Pricing is beyond what we know it to be, it goes beyond just putting a price tag to a particular product or even a service. When you have a well structured pricing, it goes a long way to make sure that businesses are able to run and expenses are covered.

Key Components of the Pricing Process

I will like to talk about the key components of pricing process because it comprises of a lot of stages. When it comes to pricing process, you will need to make sure that market research, cosy analysis and even comparing your competitors price also goes a long way to form the components of the pricing process. There are also factors involved such also the consumer demand and lastly paying attention to the industry trend as that is very important also.

The Importance of the Pricing Process

There are several important things that I believe the pricing process gives which I would like to talk about below;

• Maximizing Revenue and Profitability: The first is that with pricing process, it helps you to jnow the business performance and not now been only able to know but also been able to assign price to a particular product or service based on the product value. This helps to ensure that profit margins are actually achieved. It helps to balance pricing so that overpricing and underpricing are avoided.

• Reflecting Market Positioning: The second one is that it helps you to know the market positioning. Positioning is very important and so with market positioning, it goes a long way to help you to shape your customer perceptions. You will be able to know the price which your customer wants based on the quality you are offering and so helps you to reach a higher target audience.

• Understanding Customer Behavior: The other one is that it helps you to know your customer behaviour. In fact this is one of the most important benefits that pricing process offers. With pricing, you are able to know your customer preferences and not only know but been able to balance between affordability of the product and the profitability of the product also. This helps you to maintain value at the end of the day.

• Staying Competitive: The next one is that it helps you to stay competitive. Yes, when you are able to know the price range of your competitors in that same niche you are in, it properly guides you in a way that you will be able to also offer your pricing in the market thereby helping you to stay competitive.

• Adapting to Market Changes: The next importance is that it helps you to adapt to your market changes. There are a whole lot of market conditions like market Fluctuations, volatility and many more which will help you to adapt to market changes when it comes and helps you to adjust to price. This helps you to know that pricing is very important.

• Building Customer Trust and Loyalty: The last one is that it helps you to build customer trust and loyalty which really helps your business to actually go far. This helps to make sure that there is a strong relationship attached to it also. The business will definitely be worth it actually.

When it comes to the establishment of the price of a product, I will say there are a whole lot of considerations to actually pay attention to. There are like the profitability, the market competitiveness and even the most important which is the customer satisfaction.

• Costs: This is the first aspect you should pay attention to. You should pay attention to the fixed costs, the variable costs and even the break even analysis. All this will actually go a long way to help you know the pricing range.

• Market Demand: Market Demand is really necessary because it helps to shape you. You will be able to know the customer's willingness to pay, you will know the market trends and most especially you will know the elasticity of demand. All these types of market demand will go a long way to help and shape you.

• Competitor Pricing: This is the major aspect you should pay attention to. You should make sure that competitor pricing are really necessary. You will need to compare the competitor together like benchmarking, and even positioning so that you will be able to know the price range.

• Pricing Strategy: The next one is the pricing strategy. When it actually comes to the pricing strategy, we have the cost plus pricing, we have the dynamic and even the penetration pricing. All these pricing strategies will help you to know the price range.

• Business Goals: Then lastly to consider is the aspect of the Business Goals. You will need to pay attention to the Profit Margin, the Market Share Goals and even the Brand Positioning. This goes a long way to help shape your business goals much better.

There are a whole lot of businesses and their pricing methods which I will like to talk about actually.

1. Cost-Plus Pricing.

• Example: Local Handmade Jewelry Stores:

This type of pricing actually works on small businesses because they make sure that their profit margin needs to be consistent. Most of the time, handmade jewelry stores make use of that because they will want to calculate the cost of the materials and not only that but also to calculate the labour cost of the necklace at the end of the day.

2. Value-Based Pricing

• Example: Apple

One of the perfect example I can use for this values based pricing is what I will refer for Apple company. If you will notice, all the apple products like the iPhones and even the MacBook are most of the time priced higher than a whole lot of competitors. Well if you look at it, they justify the value those customers will be getting from those products.

3. Penetration Pricing.

• Example: Spotify

When talking about the Penetration pricing, the perfect example I can give is Spotify. If you will notice , Spotify makes use of the music streaming market and they help in the low subscription rates. This helps a lot of users to be able to dominate the market. Spotify over the years has been able to accumulate a whole lot of customer based people who are very loyal.

4. Premium Pricing

• Example: Rolex.

This one are not common but they are still very much needed in our society. We have the Rolex who practice this premium pricing because it helps to fit in the luxury brand identity the much more. Trust me, I have seen a whole lot of people willing to pay thousands of dollars just for a Rolex and that is because it increases their status and their prestige in the society.

5. Dynamic Pricing

• Example: Airlines (Delta, Emirates).

We have Airlines as perfect examples for our dynamic pricing. This helps to make use of algorithms to be able to set their ticket prices and this at the end of the day helps the airlines to generate higher revenue beyond what we can ever imagine of actually.

Given these are the following details below:

• Amount Investing - $130,000
• Expected Return - 20%
• Units to sell - 21,000
• Production Cost - $25.00

What should be the percentage of profit that should be added to a total unit production cost of $25.00 to achieve the desired profitability?

- Step 1: Calculating The Desired Profit..

Since the expected return is 20% of the initial investment, then it will be.

Desired Profit = Investment × Expected Return

But given that the Formula for the Desired Profit is this below;

Desired Profit=Investment×Expected Return

Remember that;

• Amount Investing - $130,000
• Expected Return - 20%

That means

Desired Profit =130,000 × 0.20= 26,000

Therefore, the additional profit that will be needed for the company ROI goal will be $26,000.

- Step 2: Calculate the Profit Per Unit

Then I will need to find the Profit per unit as that is what we be used also.

The formula for the Profit per unit is this below'

Profit Per Unit= Desired Profit/Expected Sales Level

Given that

• Desired Profit - $26,000
• Expected Sales Level = $21,000

Then the Profit Per Unit will be;

Profit Per Unit= 26,000/ 21,000 = 1.24

That means even units will be sold at around $1.24 according to the desired profit first calculated.

- Step 3: Determine the Selling Price Per Unit

Then what I will do to actually find the selling price per the unit is that we will be sold for $25.00 according to what was said.

Price Per Unit = Unit Production Cost + Profit Per Unit

• Unit Production Cost = 25.00
• Profit Per Unit = 1.24

Price Per Unit = 25.00+1.24 = 26.24

That means the Price Per Unit will be $26.24

- Step 4: Calculate the Percentage of Profit Added

Then what next I will now do is to calculate the percentage of the profit added.

Percentage of Profit = [Profit Per Unit/Unit Production Cost] × 100

Percentage of Profit = 1.24/25.00 × 100 = 4.96%

That means the company will be adding a 4.96% to the production cost so that the target can be achieved.

At what price should we enter the domestic market?

Since the Price Per Unit is $26.24, then I will say we should enter the domestic market with $26.24 per unit as that will be the perfect price to enter the market.

If the competition has a price of $28.00 for a product with similar characteristics, would it be possible to compete?

Given that

• Steemian Price = $26.24
• The Competitors Price = $28.00

That will be

$28.00 - $26.24 = $1.76

Then with the price been $26.24 and been lower than the competitor price of $28.00. I strongly believe that steemians can be able to compete effectively mostly because the price been lower will be able to attract buyers much more than the competitors..

Thank you for this lecture, looking forward to more interesting and benefiting lectures in the more weeks to come

I invite @lovelystar , @newekemini5 and @okere-blessing to drop a very constructive comments on this post and also to participate in this contest.