What Are the Major Pricing Strategies?
There is a large selection of pricing strategies to choose from. However, chose wisely, because making this decision is a crucial component in making the most profits. It will also either make you or break you. One element that you need to find is the best price point. A few things such as taking the price it took to make/buy the item, its handling, the pricing of rivaling companies, strategic pricing as well as the targeted consumers can be taken into consideration. However, those aren’t the only things that are used to find the optimal price for consumers.
Keep in mind that they aren’t looking for the highest or the lowest prices, they’re just trying to find an item with the best return on their investment. Read below to learn about the other kinds of pricing strategies.
Market Penetration Pricing
Here the company sets a smaller price to try to draw in future users and thus, you will boost up sales. This is a good method because you can move the spotlight away from your rivals and instead, towards your own company. Although you do lose some money in the beginning, as soon as you’ve gained your loyal customer base, you can begin to raise prices. Our site has an article that goes into even more detail on penetration pricing so click here if you want to learn more.
Businesses first start with more expensive prices in order to get the most out of their new items, but once they start getting rival businesses, then they slowly start decreasing the price. This is beneficial since companies can make the most out of their profits with the help of their loyal customers who buy because of the exclusive brand image, as well as get back their production expenses. Then, when they start dropping prices, they get the attention of the people who are more conscious of prices.
Here, you’re trying to correlate your price with those of your rival companies. You can either decrease the price, make it equal to your competitor’s or raise it. You can monitor competitive prices manually, or use a price tracking service to match the price that rival companies are selling at.
Product Line Pricing
Here, you make the price of various items that are in a similar category at various price points. A consumer will pay more, if it has better characteristics and if it’s more beneficial to them. This kind of bias in price, assists with making the most out of turnover and profits.
Here you put some items together and then sell them lower than it is usually when sold individually. This is a great way to get rid of items that you can’t get rid of in your inventory. Simultaneously, your company also gets an upgrade in the minds of your customers because you’re basically just offering them something for free/cheaper. You can’t forget, though that what you get more from the valuable items in the bundle needs to compensate for the losses from the less valuable items.
Here, the company takes the psychology of price into account as well as the placement of price within the market. Psychology pricing is a method that you can use to get customers to act with their emotions, instead of with logic. For example, companies may put a price of $299 instead of $300 on a good since, despite no significant difference, people tend to care more about the first number that they see on the tag instead of the last. This helps boost demand by giving the false appearance of a lower price.
Here, companies try to set a greater price than their rival companies to echo the exclusiveness of the item. This method is particularly powerful when an item first hits the market and is a great method for those selling unique items. Often times, these kinds of companies also need to put more effort into their advertising, packaging, as well as into the setup and decoration of the store to back up their higher than average price.
In this case, companies sell extras available at your disposal, along with the item to help maximize its turnover. The item itself is often sold at a low price whereas all of its accessories cost much more. That’s where companies get their profit.
This method is used usually to get the attention of those who are conscious about money. Here, companies make the costs lower by getting rid of the costs that they would have used on things like marketing or production so that they can offer lower prices. Therefore, customers buy items without any frills.
There are many various kinds of strategies for pricing that you can choose from. Decide which one is important, and we’ll tell more on how can you pick a pricing strategy that will be right for your business in our next article.