|
Subscribe to the AFSD ...
|
 |
|
|
|
Marketing Tips You Can Use Right Now ...
Pricing Products Right ...
Pricing products at this time is more challenging than usual because of the stop-go pattern of consumer spending and sharply decreased inflationary expectations. Indeed, buyers no longer tolerate the kind of price increases they saw in the past. During that time, manufacturers took into account not only increased costs already felt but those that they anticipated. Today there is no need to build in big inflationary expectations. Instead get back into the habit of pricing products according to their real costs. Let next year's pricing decision account for whatever unexpected costs factors crop up between now and then.
Don't however, fall into the trap of thinking that disinflation means inflation-based accounting can go out the window. Manufacturers that depreciate their plant and equipment on an historical cost basis and price their products accordingly will almost certainly suffer - and may even fail in the long run. Products should be priced to reflect the true cost of replacing the means of production. This means working out a depreciation schedule based on current prices for plant, equipment and other capital goods. Only in this way will there be enough cushion in revenues to handle inevitable future expenditures for capital items.
|
