Pricing Policy for business

Posted by Matthew Caelli in Aug, 2015

What is a Pricing Policy for business?

A Pricing policy is a series of principles and procedures by which a company determines how it sets and manages the prices of its goods or services.

What is the purpose of developing a pricing policy for business?

A pricing policy Is developed with the purpose ensuring uniformity across an organisation, demonstrates compliance with legal obligations, and clarifies principles with regards to the way in which products and/or services are priced.

What is the principle structure of a Pricing Policy for business?

A pricing policy structure could include (but would not be limited to):
• An outline of the purpose of the pricing policy.
• The scope and extension of the policy – what it will apply to.
• The objectives of the policy – what setting a policy hopes to achieve
• Any legal or legislative requirements of the organisation’s pricing (if applicable).
• The pricing strategy – The means and methods by which prices will be set and adjusted.
• Responsibilities of employees in adhering to the policy.
• How and how often prices and the policy as a whole will be assessed, reviewed and, if necessary, adjusted.

Where does the development of a Pricing Policy fit into the process of conducting e-commerce marketing?

When conducting e-commerce marketing, it is important to make sure a pricing policy is in place before any actions are taken; It is impossible to sell a product or service without first determining a price for it. A business will first need to determine the methods by which they attach a price to  goods/services, and then determine how it is displayed to the public – whether the price is up front for everyone to see, or whether a customer has to make contact with the business to find out what the price is.
There are other details to consider as well when implementing e-commerce marketing, such as how prominently features discounts and promotions will be relating to prices, as well as whether additional fees incurred (such as delivery or postage) are shown immediately or later on in a transaction.

How does development of a pricing policy for business impact on e-commerce marketing?

Developing a pricing policy is critical to e-commerce marketing and, if done poorly or incorrectly, can have a significant impact on sales. A business which chooses not to display it’s prices prominently can prompt potential customers to lose interest, and similarly, some customers may be shocked into navigating away due to an unexpectedly high price of a product or service on offer. Businesses which don’t display additional fees can be viewed as deceptive or untrustworthy, and those who promote sales too aggressively can overwhelm and scare customers away. A delicate balance has to be found and all these points have to be taken into consideration when deciding what is appropriate for a business to do with their prices.

What specific terms are used when establishing a pricing policy for business?

Terms which may be associated with pricing policies for business include:

•  Gross Profit Margin – The amount of money retained from the sale of a good/service, after the cost to purchase the product has been taken from the price at which the product was sold. Often expressed as a percentage.
•  Rounding – The way in which a business ends the numbers of its prices – for example; “$19.99”, “$20.00”, “$20” etc. Consistency is typically valued and required when deciding how to round prices off.
• Visibility – How visible and accessible a business chooses to make its prices for its customers.

Where can I find more information about a pricing policy for business?

Websites with useful information regarding pricing policies include:
http://www.business.gov.au/business-topics/business-planning/marketing/pricing/Pages/default.aspx
http://www.pfga.org.au/content/Pricing___Costing_for_Small_Business.pdf
https://www.business.qld.gov.au/business/running/marketing/pricing-products-services