{"id":2285,"date":"2019-11-28T16:13:09","date_gmt":"2019-11-28T10:43:09","guid":{"rendered":"http:\/\/www.intelligencenode.com\/blog\/?p=2285"},"modified":"2026-04-24T17:25:51","modified_gmt":"2026-04-24T11:55:51","slug":"pricing-policy-affects-sales","status":"publish","type":"post","link":"https:\/\/www.intelligencenode.com\/blog\/pricing-policy-affects-sales\/","title":{"rendered":"How Your Pricing Policy Affects Your Sales"},"content":{"rendered":"\n

Price optimization is one of the key factors in every business operation as it can raise prices whilst improving sales volumes at the same time. Savvy pricing managers will implement it and focus on building their business to cater to the most profitable customer. However, that sounds easier in theory than it is in practice as numerous companies utilize simple pricing policies without identifying important market indicators like the products that are most profitable and customer demands, among others.<\/p>\n\n\n\n\n\n\n\n

Therefore, the decision-making processes are based on the lack of knowledgeable information which leads, in most cases, to bad pricing policies that don\u2019t perform nearly as well as they ideally could and should. Pricing policy has a direct impact on total business revenue and as such, must be carefully thought out. There are best practices companies use to determine and develop their pricing policy. In this article, we\u2019ll show you some of those practices and how they affect sales.<\/p>\n\n\n\n

Cost-based pricing policy<\/b>
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Cost-based pricing is determined by adding a fixed profit percentage to the overall cost of a product or service. The end results is a selling price that aims to cover all the costs during production or delivery stage and attain a certain level of profit.<\/p>\n\n\n\n

The policy is simple and fast to implement as it doesn\u2019t require much market and competition research. That is why cost-oriented pricing<\/a> is also extremely popular because it uses information managers can obtain very easy. In addition, the company can easily present a case for defending its prices as they cover the costs for the most part.<\/p>\n\n\n\n

Nevertheless, the main drawback of a cost-based pricing policy is its ineffectiveness. Determining costs before pricing is not suited for today\u2019s markets as costs vary depending on volume. In turn, as the price forming is driven solely by costs, this significantly reduces profitability because these prices don\u2019t reflect the true value of the market. In fact, they are closer to being completely opposite to strategic prices as there is no consideration of market conditions.<\/p>\n\n\n\n

Joel Dean, professor of business economics at Columbia University, says that\u201ccost is usually the <\/i>crucial estimate<\/span><\/i><\/a>in appraising competitors\u2019 capabilities\u201d<\/i>, which is what a cost-based pricing policy<\/a> completely ignores. It also ignores the role of customers, which are two main reason why it usually affects sales in a bad way as it doesn\u2019t take into account these vital factors in order to determine what specific products it wants to manufacture, as well as the quantity of it.<\/p>\n\n\n\n\"Pricing<\/a><\/span>