Pricing Structure


Price is the most important P of the 4P’s and yet the most neglected.

My question is simple, How Do you Price your Product or Service?

The common answer I get is, we decided on a number, which is a good starting point but not necessarily the right answer.  So, what is the right answer?  What formula do I use?  Formulas are not necessarily the answer either, only a part of the components that make-up the Price. 

To learn about Price, I usually suggest to people to visit discount stores, when companies Fail in their Pricing Strategies, their products end up in discount stores for the Lower Price, Discounted Price or actually the Right Price they Failed to determine.   Did these Companies Pick the wrong price? Not have the right features in the Product? Forgot about Value?  Have Poor Service??? 

Probably all of the above.


Let’s explore my comments and dissect Price.


The overall Strategy of your business defines your Price.  How you Position yourself in the Market Place is related to the price you elect to charge.  Positioning is tied to Differentiation and they are interconnected in lots of ways.  

Positioning defines who you will compete against and which niche you will target, Differentiation focuses on highlighting your value offering to your customers and most importantly that your unique offering cannot be easily copied by your competitors.  Such a successful process will result in generating profits.

Price, Positioning, Differentiation are interconnected, work closely together and need to be taken into consideration in all aspects of your Strategy for Price.  It is important to note that All 4P’s work together, however we are Only focusing in this article on one P: Price.


What is the role of Price?

It has to cover the cost of the 4P’s: Cost of making the Service/Product, Cost of Place (distribution/geographic coverage), Cost of Promotion (discounts, print, online, public relations, advertising–), and Cost of Price (Profit + cost of all P’s).

       Pricing Structure                                        

 Some businesses are eager to follow Strategies that have been around for a long time such as: Cost Plus Pricing, Value Based Pricing, Competitive Pricing, Mark-Up Pricing and so on.  My approach is different, I work on the Intangibles that affect Price and make them more Tangible to your customer which I will explain below. 

Mark-Up Pricing is very common in the Retail industry and unfortunately also with a large percentage of Companies that sell Products in general.  Is it successful?  The answer is in front of you wherever you go, All the Discount Stores are the result of mistakes in the 4P’s, mostly in Price:  Products were Over-Priced, Failed in Value, Poor Positioning & Differentiation and the sort. 

Establishing a Price for Services is very challenging and needs to be built around Value.  The basics are simple and involve hard work, gathering information, compiling data, have a multi-faceted approach before picking a number. 

Food for thought for those of you in the Service industry, below you will find topics for consideration in pricing your service:


Learn about your Target audience

Most Importantly, Tell Them who you are

Define your Value + Culture

What is Unique about You

Craft Your Message Properly:  Mission / Vision

Focus on your Competitive Advantage and Promote it



When, Where, Why and How—  Buying Decisions—

Do you know the answers to these questions about your Target Market?


We will look at a couple of examples, Cereals and Smartphones.  How do we make pricing decisions for a basic product and a luxury product?  

1- Cereal is a very common product.  According to Shopkick who surveyed in 2019 more than 43,000 US consumers about their cereal habits found that:

96% of consumers buy cereal every time they shop

41% of consumer buy two and 19% buy three or more per trip. 

Most of the purchases (65%) occur at supermarkets with another 28% at superstores, including Walmart and Target.

The lure of e-commerce has not yet hit the cereal sector, with only 0.2% of Shopkick respondents buying their favorite breakfast product online.

Americans also prefer brand names, with only 16% regularly purchasing generics.


2- Smartphones:

A recent survey of 1,303 smartphone buyers conducted by USA Today in 2019, and SurveyMonkey found that:

Only 16% of respondents were willing to pay between $751 and $1,000 for a new smartphone.

Just 3% were willing to pay over $1,000.

30% of respondents are inclined to buy devices for less than $300

A combined 51% of buyers are willing to shell out anywhere from $300 to $750 for a new phone.


My point here is; you can price your cereal or smartphone by using a formula, picking a number or pay attention to above data and learn for example that as a generic cereal brand your niche is that 16% of the market and build your strategy accordingly.  This will be step one in the process.

Now that you have a Strategy, Target Market, Mission & Vision, Competitive Advantage, Value and Message, we can start defining your fixed and variable costs, break-even point, profit, competitors pricing, range of acceptable pricing by consumers, work on your Positioning and Differentiation and define that Price.

Most Companies do it backwards, fall in trouble, lose money and wonder why they are not making that Profit, the most important part of Price.


How We Can Help You


We help businesses Define their Price, Position/Differentiate their Product/Service and make a Profit. 


What is your Pricing Strategy?  Are you Satisfied with the Results?

We Understand Your Needs and Share Your Dreams

Contact Us to increase your Profits and Minimize your Risk