Plans Start a New Business? Congratulations in Advance. It takes more than calculating your costs to set a price. A deep research and an understanding of consumer behavior are required. In Business, the Market pattern is to be studied and understood, for Maximum gains.
To fix an effective price, you have to consider the following:
There are different Pricing Strategy Available:
Each depends on one of the factors mentioned above. A good idea of what you want to achieve will guide you, either as a start-up or a growing business, will help you make the right decisions.
If Yes, then you need a prizing strategy. Pricing Strategy is simply the Various Methods with which you can fix a competitive price for your goods and services. With the right price plan, customer attraction and retention is assured. Also, profit-maximizing can be achieved to a certain degree. Here are the 10 pricing strategies you can choose from.
As a newbie in a Business, one of the biggest challenges you might face is convincing customers to patronize you. This is because there are already established brands, in the same league of business as you are to whom they are Loyal to. This scenario can be won using a good Market Penetration Pricing. This simply involves selling at a lower rate or providing some free services until you get a considerable customer base.
Should your competitor sell at 100 Naira, you can sell at 95 Naira. A giveaway, free delivery service or even a free sale could do the trick for you. This simply launches you into the Market. But be warned, this Pricing strategy may come with some initial Income loss, while it helps you draw attention to your product or service.
After a successful market Penetration, you can then increase your price to reflect on the true value of your Product. A Good Example of this is the 50 Naira OPay Ride, around town, but certainly we all know its too good to be true, but it is.
This type of pricing triggers an Emotional response in a buyer.
Placing a Price tag of 199 Naira Instead of 200 Naira will definitely create an illusion of a cheaper price, although the difference is only 1 Naira. This type of pricing makes the buyer have a sense of saving money.
Another example of psychological pricing is when competitors are increasing their price (perhaps because of an increase in production cost) but you reduce your quantity/quality and keep the price the same.
This pricing technique works better when you have a unique product or service, without a competitor. You simply set a high price for your offers, this creates an impression of value in the minds of customers.
Before you do this, do ensure your buyers perceive your offer to be worth the price. High Quality, packaging, fresh experience, and marketing strategy all have to mix to support premium prices.
This type of pricing is mostly used for luxury goods. The higher the price set, the higher the perceived value.
There is a thin line between what people are willing to pay for a product and the value in their eyes. Recognizing this and setting a commensurate price is called Value-based pricing.
If a product meets the needs of a consumer, then no matter the price tag, they’ll always pay.
This type of pricing technique is old, but it still has relevance in todays business world.
The use of discounts on certain goods, attaching a gift to an item or even a buy one get one free package. This has been known to drive sales.
This style works with deadline or limited stock. It simply makes the buyers act fast or miss out.
This kind of pricing technique may even bring customers your way.
Once you expand your business to a new country or state, you can change the price of your goods or services. Factors like Market demand, transportation, tax and cost of materials/labor can affect the prices of goods.
If you sale Cold clothing in the North, once your market gets to the east, the prices will differ because its colder in the North than the east.
Demand and supply determine geographical pricing. An area with a scarce product, will definitely sale the available for higher prices.
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Products that always require an upgrade or regular renewal usually go with this type of pricing system.
Assuming you seel Inkjet printers, users will always have the need to replace the ink cartridge once a while, for without the cartridge the printer is useless.
Buyers have no other option than to continue buying this cartridge. On this note, the price can be increased anytime because the company holds its customers captive.
This pricing strategy involves keeping your production and marketing costs as low as possible with the intention of selling at a comparatively lower price and still be able to make a profit. It is used to attract price-conscious consumers.
Economy pricing can be used by large businesses but is not advisable for startups and small businesses. The reason is that the latter lacks the sales volume which bigger companies enjoy.
Also, large scale production helps lower costs and small businesses won’t be able to do that. Another reason is that economy pricing often involves forgoing branding. As a startup or small business, branding is important to create awareness and differentiation for your product.
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This type of pricing strategy is used when a new product is pushed into the market. You set a high price and gradually reduce it to something that is acceptable by the customers.
This pricing strategy can be seen with the introduction of new models of smartphones, TVs, cars, etc.
A sense of exclusivity is created for the customer.
To push out inventory fast, you simply bundle items together. E.g, exercise books and pens/pencils. Consumers will likely buy a pack of books with a pack of pens attached to it.
This pricing strategy helps improve the perceived value of your offers since customers will feel like they are getting more for their money. It is also helpful in increasing sales for a slow-selling product by offering it alongside another that sells fast.
Depending on your business goals, there are a number of factors you should consider before setting a price for your product or service. A good pricing strategy is essential in ensuring you make adequate returns and keep your business afloat or ahead of the competition.