with all sense of sincerity, what do you look at and keep on looking when walking from aisle to aisle, row to row in a shopping mall? is it the design and packaging of consumer goods, expiry dates, manufacturing dates or the price tag.
to be sincere i usually spend more time scanning through prices before expiry dates. its not my fault, we always want the best for less, and the most suitable to be more affordable.
As a business diagnostic expert i oftentimes take it a nudge higher to try and figure out the strategies most producers and manufacturers employ to fix the final price on their products or services.as an entrepreneur you should do the same.
whiles there’s nothing wrong with low priced products and services, you must understand that the price of every product is a reflection of its value. and the concept of value of a product or service is entirely the prerogative of the designer or manufacturer. i’ll tell you a short story.
“THE PRICE OF A PRODUCT OR SERVICE IS REFLECTION OF ITS VALUE”
A young man once bought a flight ticket, without studying the terms and condition for the flight and literally kept his gaze on the price for the ticket, unknown to him the ticket was for two stops before it gets to its final destination. after paying for the ticket, his experience afterward cannot be compared to the value of the ticket because a journey that would have lasted for nine hours lasted for 24 hours.
whiles i do not blame the airline operators for the price strategy employed, i will like to intimate you with 7 strategies that is used in the market place today and as a forward looking business person, adopting, adjusting and adapting to one of these strategies could be a game changer for sales for your products or service.
first of all,Pricing a product or service can be a daunting prospect, especially if you’re at all unsure about how involved the subject of pricing can be. Although there are plenty of strategies you can use to go about establishing a presence within your chosen industry, results will undoubtedly vary.
In this article, you will need to understand the psychology of pricing, as it underpins the success or failure of any and every available pricing strategy. In the marketing mix, pricing is the only thing that brings revenue and as such, it is vitally important that you become familiar with the ways you can use it to your advantage. These methods include (but are not limited to) the following:
1. Penetration Pricing.
This is a pricing strategy that revolves around pricing a product or service low enough so that it attracts customers and captures market share. Once the product is established in the minds of the consumer, the price can then be raised. The main reason you would want to employ this strategy is to boost the initial presence of your business early on, and set yourself up in a comfortable position to capitalize on later sales at the higher price. Additionally, penetration pricing also helps consumers make the decision to switch between brands because of the lower price. This can be used to promote brand loyalty effectively. however never peg the price of your product beneath the unit cost of production to impress market activities.
‘Extremely low priced product sometimes reflects inferiority”
2. Pre-Emptive Pricing
Also known as predatory pricing, this strategy is aggressive in nature and is intended to drive away competition or deter others from entering the marketplace by deliberately selling at below market prices (temporarily, of course). Pre-emptive pricing strategies typically exist in monopolies or other markets characterized by low levels of competition. As such, it will not be as relevant to new business owners; however, it is an important and potentially useful strategy you may need to come to terms with.
3. Premium Decoy Pricing
This is a pricing structure that—as opposed to pre-emptive pricing—sets prices in conflict with one another internally. In other words, you will be pricing one of your products or services at a higher price to encourage sales of another product, the results of which are surprisingly consistent. “Adding Small Differences Can Increase Similarity and Choice” you can effectively implement price points and increase your overall sales volume. As long as you have more than one product or service on offer, and are able to set a price that maximizes conversion rates, you’ll have no trouble making use of this strategy.
4. Premium Pricing
If you’re in possession of a quality product or service, premium pricing represents a way for you to set its value artificially high in an attempt to encourage a favorable public perception, something that you’ll have on your side as a new startup. Additionally, if your products begin to establish a reputation for quality, this is a great pricing strategy to implement. this works especially for launching luxury brands. it will help give and sustain the perception of quality over quantity
5. Psychological Pricing
This is something that is always talked about a lot in behavioral economics, psychological pricing is something that we as consumers are exposed to every day. This is the reason why you’ll rarely find a product or service priced at irregular values that do not end in a 0, a 5 or a 9, as these are the amounts most customers are willing to buy at. you must have seen some pricelist with with #499(Naira)which give the impression that its lower than #500 (Naira), even though the difference is only one Naira. this method of pricing can make a dramatic difference in sales.
6. Value-Based Pricing
The following pricing strategy is one which really only affects products and speaks to the relative value placed on an object. CDs and DVDs are the perfect example, as the cost of manufacturing the disk will be the same independent of the information it contains. As such, the perceived value of something is what creates its value. If you can find out how much your customers are willing to spend before the price becomes a deal-breaker, you’ll be well-placed to maximize your profits. Additionally, studies have been done to investigate value-based versus comparative pricing. People become more cautious and make fewer purchases when presented with product comparisons as opposed to value propositions. Value-based pricing can be utilized with more range in a digital environment.
7. Price leadership
Lastly, we have price leadership. This is the point at which your business becomes self-sufficient and is able to dictate prices within the marketplace. As such, it is an ideal goal to aim for and will work best for businesses operating in industries where competition is scarce. Hopefully you’ll have found this article useful and will be one step closer to optimizing the profits of your business. We hope you will find the confidence to harness the power of price to your advantage. Which of these strategies did you find most.
what strategy are you thinking of implementing? for further assistance and guidance on implementing any of the above listed strategy for your products or service, do well to connect with us or leave a comment.