Pricing Strategy Guide
Do you know what factor determines the success of your product or service? You might be unaware, but the pricing of your product and purchasing power of the consumers can have an adverse impact on the sales. You may wonder how a company sets its pricing. To recede your curiosity about the company’s pricing, we here at Pricing Strategy Guide will clarify your inquiries about the pricing system.
The company opts for various pricing strategies model to fix the price of a product or service. Setting up pricing can really be tough. High pricing could miss valuable sales, whereas low pricing could affect the revenue. But don’t worry, you don’t have to set the pricing like a shot in the dark. Thankfully several pricing strategies models will assist in determining the true pricing of a commodity. But before further drilling deep, the topic lets understand what price and Pricing strategy Guide is? Price is the value set for buying a commodity or a service. It’s the result of complex research, calculations. “Pricing Strategy” is the process or method of setting a price. It takes into consideration several factors like account segments, ability to pay, purchasing power, market conditions, competitor’s actions, input charges, labor costs, etc.
Ways to Estimate Pricing
Pricing is one of the most important aspects of the marketing mix. It adversely impacts other marketing mix elements like product features, channel decisions, and promotion. There’s no single recipe to determine to price. Following steps needs to be followed for developing the pricing of a new product:
- Develop Marketing Strategy: The foremost step in determining the pricing is developing a marketing strategy, performing market analysis, segmentation targeting, and positioning.
- Estimate Demand Curve: Learn how quantity demanded varies with price.
- Understand the factors: Analyze factors like environment, legal policies, competitor’s actions, etc.
- Determine Pricing: Using the above-collected information, select the pricing models, develop the pricing structure.
Pricing Strategy Vs Pricing Model
Your pricing model is dictated on your product, whereas pricing strategy is based on the market you are competing in. Your pricing model is based on your offerings of product or service, and your pricing strategy is building seeing various factors like competitors, market conditions, and so on.
Your pricing doesn’t just impact your profitability but also affects the way customers perceive you. There are several pricing strategies out there. Therefore, we have listed some of the amazing pricing strategies:
- Competition Based Pricing: This type of pricing is fixed after extensive research. It’s also called competitor pricing or competitor-based pricing. It takes into account market rate, consumer demand. The competitor pricing strategy uses competitors’ prices as a benchmark. Competitive pricing is the best way to be ahead of your competitors
- Cost-Plus Pricing: These types of pricing solely focuses on the costing on the production costing of a product or service. In this type of strategy, business fixes a production cost and how much profit they want to make.
- Dynamic pricing Strategy: This type of pricing isn’t static. It keeps on fluctuating depending upon demands. The price hikes when the demand increase and price recent when demand is low.
- Freemium: Freemium is a strategy in which a company offers the basic version free of cost, hoping the users will upgrade for the premium version. Software companies often use this type of strategy.
- High-Low Pricing Strategy: This type of pricing strategy is used when a company offers a new product at a high cost and eventually lowers the cost as the product drops in novelty or relevance. Companies offer discounts, clearance sales, or buy one get one free like offers. These strategies are also called discount pricing strategy.
- Hourly Pricing Strategy: These types of strategies are often used by individuals who provide business services like laborers, consultants, freelancers. Clients hesitate to accept this type of pricing as it can reward laborers instead of efficiency. Moreover, this type of pricing is also opted in perishable items market.
- Skimming Pricing Policy: in this type of strategy, the company charges the highest price when products are new and eventually lowers the price when the product less popular. It’s not the same as high-low pricing that lowers the price over time.
- Penetration Pricing Strategy: In this type of pricing, the companies enter the market with a lowered price to draw the attention of the consumers. Its aren’t sustainable for the long run and could be ideal for a short time.
- Premium Pricing: if you are providing luxurious items or premium services, then this could be the best pricing strategy for you. The business offers its products at higher prices to give an image that products are of high-quality, premium finish, and high value.
- Project-Based Pricing Strategy: In this type of pricing, the price is estimated based on the project or worktime. Freelance workers, laborers, contractors use it.
- Bundle Pricing Model: This type of pricing is used when you combine two or three products and sell for a single price.
- Geography Pricing Model: In this pricing strategy, the prices of the commodity vary depending on the geographical locations or market. The price fluctuates based on several factors of the location like its economy, availability of labor, etc.
When evaluating the factors which determine the changing prices, then your head will spin. There is a long list, like competitor analysis, consumer demand, industry needs, profit needs, etc. You don’t need to master every factor. Once you have chosen the right pricing strategy, then the next step to pick a pricing model based on the product or service you offer. How great are your ideas? Or excellently you advertise it? Without appropriate pricing, you won’t be able to capture your consumer’s attention.
Remember, pricing is an iterative process. It’s unlikely you will opt for the right pricing strategy. It will take a couple of tries, and that’s ok. If you are struggling to find a way to apt a perfect pricing strategy for your business, then our Pricing Strategy Guide blog will surely assist you. Carefully read the article, and you will understand how different pricing strategies could impact your business, increase your customer base and clients, and so on. If you want to enhance your business strategies then you can even refer our Developing Innovation Strategy blog.