The price of the product will decide the success of a product. If the pricing for a product is set right, then your sales will respond favourably. The pricing of your products has a significant impact on your profits, the position of the brand in the market, and market share. Due to the importance of price, it is vital to set the best pricing strategy that is perfect for the product and fits in your business goals.
To do this, you need to learn about the target audience and competition for similar products in the market. This information will guide you in choosing the right pricing strategy.
Here is the list of pricing strategies that a business can utilize to set price for the product or service:
- Premium pricing
This is the pricing strategy where the retailer will set the price for the product higher than its competitors because the product is of superior quality. This strategy can also be embraced by businesses who are selling niche products. The companies who are first to sell the products and are offering exclusive features over their competitors can also use this strategy.
To set the premium price, the company must create a unique product that is of high value. Be it packaging or the marketing; everything must be in line with the premium price you are charging for the product.
- Penetration pricing
Companies who want to gain a reputation in the market of selling their products at lower prices can use penetration pricing. The main reason to fix prices lower than their competitors is to attract and compel customers to buy the product. Though it might incur an initial loss, it helps to enhance the brand reputation in a short time.
Once the company makes its name in the market, it can increase the price of the product, which resembles its market position.
- Price skimming
The key benefit of using this strategy is that the businesses can gain more profits in the initial stage and reduce the prices to sell the products even to the customers who have price constraints. This strategy must be adopted by the small businesses to cover the expenses that they have spent to start a business and reap profits in the initial phase of the business.
- Psychological pricing
This is a dominant strategy that is widely used by many marketers globally. Many customers who are price conscious will like to buy the product that is sold for £98 than the £100 product. When the product is £2 less, then consumers are more likely to buy the product at £98. It gives the customer the impression that they are buying the product at a lower price.
- Economy pricing
This is the most popular and widely used strategy by big companies in the market. This is embraced primarily by businesses in the food industry. This is to grab the attention of consumers who are price sensitive. To give the product an economical rate, the retailers would cut down the amount that they spend on marketing and production. When these costs are reduced, the final product price will come down automatically. However, this strategy is not suitable for businesses that do not have huge sales. The businesses that cannot use economy pricing can go and offer discounts to loyal customers to retain them for a long time to your brand.
- Bundle pricing
This is a strategy that is used by small businesses to earn huge profits. The concept behind this pricing is that multiple products are sold at a lower price. This makes the customers happy that they can get various products by paying a small amount. This is a win-win for both retailers and customers. The main objective of this pricing strategy is that it will improve the perceived value of customers and let retailers sell the products that are stocked in the warehouse for a long time.
This strategy is highly effective for the business to sell the products in low demand. You can bundle both high demand and low demand products together and sell to the customers. It is always eye-catchy for customers to buy a group of products at a small price. This also makes the shopping process of the customers a breeze as most of the products are bundled together. You must put the high-value items and low-value items together so that the losses can be covered.
This is the best way that can be embraced by retailers to earn profits in a short time.
- Optional pricing
In this type of strategy, there is an additional product offered along with the main product to increase the revenue rate. For example, the airline company provides a window seat to the customer, and the print company offers ink cartridges to the customers. These extras made the customer delighted and happy to take your products or services again and again.
- Product line pricing
The products that are under the parent product would have different price points. For instance, a phone company sells phones that are with different features such as sturdiness, sleek design, or waterproof would have different pricing. The same applies to the hotels that charge for the rooms based on the facilities that are offered in each room, such as suite rooms, budget rooms, etc.
These are a few of the pricing strategies that a business should become familiar with to choose the right strategy for setting the price for the product.