Pricing Basics
The process of determining what a company charges for its products/services.
What is pricing?
Identify the four parts of the marketing mix.
Product, Price, Place, Promotion
A prediction of future sales revenue
What is a sales forecast?
Money earned from selling goods and services.
What is revenue?
The most important measurable indicators that tell how a business is performing.
What are key metrics?
The actual price the customer pays after discounts or other adjustments.
What is an exchange price?
How does pricing affect place (distribution)?
Expensive products may require selective distribution; lower-priced products may need mass distribution.
What is qualitative forecasting?
Forecasting based on expert opinions, experiences, or non-numerical insights.
Transactional and recurring are two types of what?
What are the two types of revenue streams?
To determine what should be measured to ensure success and track progress.
What is the purpose of identifying key metrics in a Lean Canvas?
Name two characteristics of effective pricing.
Answers may include: competitiveness, covers costs, aligns with customer value, fits the market, supports profit goals.
How does pricing affect promotion decisions?
Promotional strategies and budgets depend on price level and target market.
Forecasting based on numerical data, trends, and statistics.
What is quantitative forecasting?
Subscriptions, memberships, monthly service plans are different types of this.
What are recurring revenue streams?
Give an example of a key metric a small business might track.
Customer acquisition cost, monthly revenue, churn rate, average transaction value.
Higher or lower prices affect product quality, design, features, or materials chosen.
Pricing affects the product decision. How?
What is a pricing objective?
A goal that guides how a business sets its prices (e.g., maximize profit, increase market share).
Why don’t all businesses use sales forecasts?
Lack of data, lack of skills, unpredictable markets, or limited resources.
Revenue – Expenses = Profit (or Loss)
What is the formula for profit?
Why must key metrics be measurable?
So businesses can track changes, measure goals, and make decisions based on data.
List three factors that affect a product’s price.
Answers may include:Competition, demand, production costs, customer perception, marketing mix, and distribution choices.
What is being priced when prices are set for products?
Not just the product—also the brand, service, convenience, and overall customer experience.
Name two factors that determine how far ahead a business should forecast sales.
Stability of the industry, availability of data, seasonality, and business cycle length.
Why is understanding revenue streams important for entrepreneurs?
Helps plan cash flow, determine business sustainability, attract investors, and plan pricing.
According to Unit 5, what questions should be asked when choosing key metrics?
Why is it a key metric? How is it measured? How does it affect the business? How does it benefit the business?