Pricing

It can be difficult for a new enterprise to set prices for its products or services that will both cover its costs and be at a level that potential customers are happy to pay. The different methods that enterprises typically use to set prices include:

• cost-plus pricing – calculating the cost of creating the product or service, then adding on a percentage
• competition-based pricing – looking at what competitors charge for the same sort of product or service and charging a similar price
• skimming – charging a high price initially to ‘skim off’ profits, before dropping the price later (this often happens with new technology)
• penetration – charging a low price initially to appeal to more customers (‘penetrating the market’), before raising the price over time