For example, a luxury gift importing business sets prices not only to cover costs and make a profit but to position products as luxury items. A printing shop with a good location charges slightly more than its competition because it has a convenient location and it has determined that the market will bear the higher price. Once you have briefly explained your pricing and rationale, discuss where this pricing strategy places you in the spectrum of the other providers of this product or service. This makes a bad impression because it's usually unrealistic. If you really do have a higher quality product, it will appear that you may plan to underprice it, and consequently undersell it.
Costs tend to be underestimated.
If you start out with low costs and low prices, you leave yourself with little room to maneuver, and price hikes will be difficult to implement. If a price will be lower than that of an existing, competing, product or service, explain how you will maintain profitability. This may happen through more efficient manufacturing and distribution, lower labor costs, lower overhead, or lower material costs. Discuss how higher prices may reduce volume, but result in high gross profit. All Rights Reserved.