Competitors can match the lower price, leaving both parties out in the cold. This strategy is possible when price is not the customer's greatest concern. This strategy targets a specific segment of the buying public by carrying products only in a specific price range. This is useful for low-cost, consumable products like shampoo or toothpaste. Many stores find this a desirable pricing strategy for sales and year-end clearances.
Every service has different costs.
Many small service firms fail to analyze their services' total cost, and therefore, fail to price them profitably. By analyzing the cost of each service, prices can be set to maximize profits and eliminate unprofitable services. Service Cost Components Material, labor and overhead make up the total cost of any product or service. This is the cost of materials found in the final product. For example, the wood and other materials used in the manufacturing of a chair are direct material.