Use a pricing method that complements your marketing mix price strategies. Pricing comparison sites list market based pricing; use them to research the best, and new, product pricing strategies within your industry and markets.
Selecting the right pricing method for your product(s) is as important to your business as producing a product that is good quality and that the market wants; as hiring good sales staff; as having control of your costs; and as important as completing a competitive intelligence analysis.
The pricing method you select can help your business earn sales revenue and gain market share. Pricing is an important marketing mix price element.
Why and When to use it: Almost like a loss leader strategy, you may wish to use this approach to bring customers to you - they will come for the perceived value of the low price. Make sure that you have other higher value, higher price items to sell. Also make sure you can produce the generic or economy priced products at very low cost; unlike the loss leader approach this pricing should not be at below cost.
Why and When to use it: You might choose to charge a different price for your product in your 'home' market than a market where you are a secondary or tertiary supplier. You might choose to structure your price differently for large buyers who can buy a much larger volume of your product than smaller buyers. You might choose to sell your product for a different end use and therefore a different market segmentation.
Each of these differences can translate to differential pricing strategies. This strategy could be used through the growth, maturity and declining stages of the product life cycle.
Why and When to use it: You can only use this premium pricing strategy if you have a premium product and if your market recognizes it as a premium product. It is unlikely that you will get your premium price in the declining stage of your product's life-cycle.
Why and When to use it: If you have products that have companions in your product line, you can effectively use this strategy. However try to be first in the market or try to have some unique features and benefits that are not easily duplicated because your competitors will quickly follow your strategy.
These four pricing tactics are alternative strategies to some of the other tactics discussed on this site.
Making your decision in terms of which pricing method to use for your product (and in relation to your competitors and to your buyers' behavior) is key to success in managing your small business.
There are a number of pricing comparison sites on the internet. Use them to do research on market based pricing (this is particularly useful for new product pricing introductions and strategies (such as product line pricing).
Do not make your decision until you have tested your proposed price elasticity or inelasticity. Do not make your decision until your competitive intelligence indicates the potential and likely responses of your competitors. Learn to understand and predict your buyers' behavior.
This all sounds so very complicated and detailed - and unfortunately it is. Getting the price wrong can cost you sales and/or profit. But getting it right, will help you grow sales and profit!
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Pricing is the foundation of your business success.
Interestingly many businesses focus on either building their price structure by using costs as the basis OR by using market information (that is, what the market will pay).
The reality is that the price needs to be constructed with both costs and market forces as part of the consideration. Additionally, the product or service value (ranging from commodity to luxury) plays a role in price strategy.
Building a strong pricing program is part of your marketing mix activities (product or service; promotion; place or location; and price). Many businesses focus most of the marketing attention on developing the product or service program and then promoting it; make sure you give price the time and attention it needs.
Businesses need to be more aware of the power of competitive and comparative markets than ever before.
Because technology and the internet makes pricing information available 24 hours a day, 7 days a week.
Customers use their mobile phones, laptops and even desktops to price check and compare.
The speed of pricing changes makes this an urgent action item for all businesses.