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The ultimate reason for developing a successful pricing system is to make a profit from your work and the products you sell. The amount of profit you’ll realize depends on your costs, selling price, the number of products sold and/or the amount of service rendered.
There are many business pricing systems or models you can use to set prices for your products and services. Determining the type of system or model to use is an important consideration for success. While no single pricing system or model will work for all businesses, all pricing strategies should take the following into consideration:
Markup is simply the difference between how much an item costs you and how much you sell that product for.
In general, products can be priced based on one of three ways: market (or customers), competition or costs.
Customer- or market-based pricing is focused on how your customers value the product and how they respond to different price levels. You are trying to determine what they are willing to pay based on the perceived benefits of the product or service.
Competition-based pricing focuses on what products the competition is offering and setting your prices at the same or close to the same price as competitors. Competition-based pricing does not take making a profit into…