Getting the Price Right by conducting a Price Sensitivity Analysis

1. Getting the Price Right by conducting a Price Sensitivity Analysis When it comes to purchasing something, pricing is one of the most important factors to consider before buying. Not only will the pricing serve as the purchasing value but it also affects the behavior of the consumers. Questions such as the following will often be mentioned: - Is this the best price? - How much do the others sell the same thing for? - Too expensive, should you still buy? - Too cheap, is the quality subpar/fake? - Many more… Business minded people also often take advantage of this information, hence, the utilization of different pricing strategies. By using a strategy to set the pricing, there is a great need for understanding the market demand, economic patterns, level of competition, and other factors that needed consideration when determining the right price. There are several commonly used pricing strategies such as: 1.Cost-based Pricing Strategy – final price is determined by adding a mark-up to the original cost of the product. This strategy is often used by retailers or brick and mortar business models. 2.Demand-based Pricing Strategy – final price is determined by basing it to the current demand. Basically, the pricing will vary depending if the demand is high or low. A great example is the seasonal pricing of hotels and flights. 3.Competition-based Pricing Strategy – final price is determined by considering the competitor’s pricing. In other words, the pricing will depend whether to set it higher, lower, or equal to the pricing of the competitors. 4.Value-based Pricing Strategy – this pricing strategy is commonly used for products or properties that need more consideration when it comes to setting the price. eFinancial Models Zurich, Switzerland 8000 info@efinancialmodels.com https://www.efinancialmodels.com/

2. Getting the Price Right by conducting a Price Sensitivity Analysis In case for commercial properties, conducting a price sensitivity analysis is important to determine the real value of the property being sold. Not only will it consider its base-construction cost but also considers its capacity to generate income in the future. There are also other pricing strategies used for determining the pricing. Depending on the behavior of the consumers, the pricing strategy will vary. That is why; conducting a price sensitivity analysis is very beneficial as it focuses on how consumers place the importance of a product or service’s price relative to the other factors that makes them continue the purchase. To learn more about the pricing strategies, please feel free to read the article: Price Sensitivity Analysis - Getting the Price Right. With today’s mentality when it comes to saving as much as one can, conducting a price sensitivity analysis is a must. If you need a tool that will help you conduct a price sensitivity analysis, please feel free to visit eFinancialModels, a platform that offers industry-specific financial model templates for different use cases which some includes Price Sensitivity Analysis tools. eFinancial Models Zurich, Switzerland 8000 info@efinancialmodels.com https://www.efinancialmodels.com/