Share Price Pricing

Description

Set product and service prices such that they end up maximizing company share price.

Consider the mind-set of investors. Are they impressed by growth? Then consider growth pricing. Do they want to see you beating your competitors? Then use appropriate elements of competitive pricing. Do they like profit (perhaps for dividends)? Then look at profit pricing. The bottom line is to do whatever it takes to appear attractive to people who might buy your company shares, whether these are day-traders who account for share price variation or longer-term investors who have more influence in setting share base levels.

Example

A tech start-up has just gone IPO, with shares recently released into the stock market. As well as a focus on products, they use principles of share-price pricing to ensure their shares continue to look good (and so enrich founders and other big share owners).

A company which intends to raise money with a new share issue pays attention to the relationship between product pricing and share price to optimize the new investments they can gain.

Discussion

The relationship between product prices and share price is seldom simple and there may be a number of other factors that drive the share price. Nevertheless, pricing does affect sales and consequent returns, and share owners pay particular attention to company finances. If share price is a concern, it hence makes sense to at least try to understand something of how product prices ripple through to share price.

Other factors that affect company finances and product price include variables such as material costs, salaries, overheads and marketing costs. All of these may be included in the mix of understanding and setting up an attractive financial picture of the company and its products.

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Share Price Pricing

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