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It’s easy for marketers to get hung up on dreaming about ad campaigns, or working on new doodads and googaws to add to the widgets for sale. Too easy. But there’s a “P” that often gets overlooked as a marketing tool– Price. The price you charge for your product can be a door-opener, a word-of-mouth generator, a publicity-getter, or a loss-leader. It’s far too critical a weapon to leave entirely to the accountants.

Non-marketers will often get hung up on the profit margins of an item. But the margins may not matter much, because of a concept called Elasticity of Demand. Basically, this concept says that some items have ‘elastic’ demand, where a reduction in price will result in an outsize jump in sales. The bottom line is that you may be able to sell your product cheap, make less per item sold, but sell so many more units that you make more overall profit.

Of course, you can’t sell for a $2 loss and ‘make it up on volume’, as the saying goes. The prerequisite is that you cover all of your variable costs (the costs which increase in line with each unit you sell- so if you’re selling pizza, it would be the cost of the dough, cheese, sauce, the electricity to heat the oven and the hourly wage for the pizza man).

There are plenty of great examples of clever pricing strategies, which I’ll try to address in future posts.