The goal of almost every business owner is to generate a profit 
either for themselves or their shareholders. This can be 
challenging at best. So much thought and effort go into running 
a business, accounts payable, accounts receivable, dealing with 
vendors, customers, etc. Because of this people sometimes do not 
focus on one of the most important factors- pricing. Knowing how 
much you can charge for your product or service is invaluable 
information. Businesses typically want to increase volume and 
prices at the same time. In a perfect world that would be easy 
to accomplish, yet we do not live in a perfect world. So just 
how do businesses go about deciding how much to charge for a 
product or service?

One way that businesses do this is through trial and error, by 
seeing how much they can charge before volume starts to drop 
off. This is a very ineffective method, but is practiced by more 
businesses than you may realize. Another method is determining 
what percentage of profit over cost that you want. Perhaps you 
sell automobiles and decide that you require a profit of 5% on 
every car that is sold, and then you price accordingly. While 
this method is good for determining if you are going to cover 
overhead and other expenses, it may not be the best way to 
increase sales. A person can spend weeks trying to determine the 
correct price for their products and services. Economists have 
many formulas to determine price elasticity, market demand, and 
cost shifting. All of these economic formulas can be helpful, 
but are very time consuming and sometimes require hiring a 
consultant. 

There are some easier ways to go about setting prices. Once 
you have determined a "ballpark" price that covers your costs, 
you can begin adjusting it up or down to maximize profits. A 
relatively new concept that is garnering a great deal of 
attention from businesses big and small is the concept of price 
popularity. Price popularity is just what the name implies, 
looking at how popular, or how frequently a price is used. 
For example, surely you have noticed how many commercials on 
television sell items for $19.95. This is a very popular price 
when compared to $19.77. Do you see many products priced at 
$19.77? The frequency in which consumers see a price has a 
strong effect on their purchasing decisions. 

Knowing about price popularity, and how to apply it, can help 
turn a slow selling item or service into a highly demanded item 
or service. Should a business set a price at $19.99 or $19.95? 
Does a price read differently to a consumer if it appears as 
$72.00 or $72? Research shows that it does in fact affect a 
consumer's decision making.  Gaining access to the research 
that shows the most popular prices, the ones that consumers 
feel most comfortable with, is a precious resource to a 
business. This is much easier than spending the numerous hours 
of financial analysis to make an educated guess at what volume 
business will drop off if you raise or lower the price by a mere 
few cents. 

The more a business owner knows about pricing strategies the 
more successful they will be in generating profits. Incorrect 
pricing can have devastating effects on a business. While many 
spend time trying to determine a break-even analysis and price 
elasticity, how many have really considered the psychological 
appearance of a price and the popularity of that price. 

In today's extremely competitive business world a business owner 
needs every advantage they can get to outwit their competition. 
Researching the information available on price popularity simply 
puts a business one step ahead of their competitors. 

Konstantin Goudkov studies the psychology of pricing,
ways to manipulate prices for maximum profit, and tactics
to control consumer price perception.

You can find his latest report at:
http://www.PricePointReport.com