There are different pricing strategies, but many businesses around the world struggle with choosing the right one.
The right strategy must therefore portray value, convince customers to buy your products, and give your customers confidence in your products in order to be profitable.
The right strategy mustn’t portray your products as low quality, make customers feel uncertain about buying, or target the wrong customers.
So, the best pricing strategy must be seen as profitable so your business can stay afloat. Otherwise, it’s just a waste of money and makes no sense.
Sales volume is the number of units sold by a company in a given reporting period. The period could be a month, a quarter, or a year, depending on the volume of sales a company wants to analyze.
Investors usually use sales volume to determine the health of a company.
In simple terms, profit margin is the amount left after you subtract the cost of doing business from sales revenue. It’s the measure of a business’s profitability.
There are three types of profit margin: gross profit margin, operating profit margin, and net profit margin.
There are various reasons why companies optimize for sales volume as a growth strategy instead of optimizing for profit. These include the following:
Sales volume is an indicator of business health.
Profit optimization is the process of looking for ways to boost a company’s profits. It involves making the best use of available resources under given constraints.
There are many reasons why companies optimize for profit:
Profit optimization puts more money in shareholders’ pockets.
There are three things a company can do to increase profits:
In essence, profit optimization can be achieved with better efficiency, better internal control, and a more orderly business process.
Growth hacking is a marketing strategy that uses analytics to discover the best way to achieve a business goal and progress. It involves content marketing, steep discounts on goods and services, major incentives, and the like.
Growth hacking is cost-effective and helps a company discover new business models and product ideas, build better products, discover data-driven strategies, and improve return on investment.
The goal of growth hacking is growth. Without proper business development, a company might be optimizing for growth without measuring the impact of some important metrics like profitability.
But can you have a growth hacking strategy at all costs? The answer is no.
Growth hackers may not consider cost when deciding how to deploy a strategy, but they can’t spend what they don’t have.
However, they can finance growth externally, but this is more expensive than using earnings from the business.
So, it’s important for a business to attain profitability before attaining growth. This way, the business can grow without sacrificing its level of profitability.
Priceagent is pricing intelligence software that allows you to know how your prices affect customers’ purchasing decisions. This helps improve your company’s sales performance and profitability.