Pricing strategies straight away impact sales and growth of the business and with the increasing number of business professionals and entrepreneurs in the market, almost everyone seems to have a strategy of his/her own. It is important to first keep in mind that there is no single “right way” that can actually determine the pricing strategy and the benefit it is expected to yield.
A decent pricing strategy will include pricing methods, pricing objectives and more. Whether you are operating a small business, a home business or running a large enterprise, finding out the mistakes in your pricing strategy is often the first step to success.
You have a product and you know you’re going to sell it but at what price should you sell it? Deciding on this factor can often be the biggest challenge businesses can face. When it comes to price setting, there are often countless variables that come into picture.
Pricing that is based on competition
It is important to consider what your competitors are doing and whether you’re too far away from them in terms of pricing. Make sure that you conduct a thorough pricing analysis considering the competition that your product is expected to face in the market. You may choose to have a research team that is experienced and dedicated. If you feel all these are going to be extremely time-consuming, employ user friendly price management software and your job is made easy.
It is one of the simplest pricing strategies that can do wonders. Make sure that you add the production cost to the overall percentage mark-up and that is it – you get the price! Since this is one of the easiest pricing strategies that businesses are considering today, you can consider making the most out of it with the right approach. You can also use them along with the other pricing strategies already in place.
If you product is one of those that have been eagerly awaited by consumers then you should not mind setting the price of the product higher and declare it as a ‘desirable one’ at the launch. This kind of pricing strategy is popularly known as ‘skimming’ in the market. As far as your new merchandise is concerned, be prepared that this price can’t be maintained forever but definitely it is going to boost your revenue with a strategy that usually does not fail. This is often a pricing strategy that works well with the technology products.
Loss leading pricing
Losing good amount of money on a product may not always look like a wise idea but if it can boost up the overall revenue of the product in the long run. Even if it sounds crazy, it can’t be denied that loss leading pricing is one of the most useful and common revenue generating price strategies. Since the ultimate goal is to grab the attention of the potential customers, the product is soon expected to rise in demand. Setting up a low price intentionally may cost you now but in the long run, it will surely help in uplifting your product in the market among your competitors, who otherwise looked tough to beat.
A sudden drop in the price of your most valuable product is going to grab enough attention. You can gain advantage by bringing a change in the price that may not be too different in terms of ‘figures’ but still a crucial and a noticeable one.
If your product is new in the market and you’re finding out ways that can help you establish it among your competitors, this is the pricing strategy to look for. Set a price that is drastically lower than your competitors, the same section of consumers is definitely going to consider your product to find out what else your product has to offer to them, apart from a ‘friendly price’. This may not be allowed to go on forever as once you have succeeded in reaching your market share goal, you can raise the price and your happy customers will still follow you. It can happen with customers getting used to your product as once they have faith, they are going to come back for more even at a higher price.
All the pricing strategies mentioned above may not be suitable for all kinds of companies. We have listed the most popular and most widely used strategies, you will have to find out the one that suits the nature of your business well. Set your objectives and plan out a pricing strategy accordingly.