Pricing Strategies For Success
The importance of pricing strategies…
One of the most challenging aspects of business can be setting the price of your product or offering, especially when entering a new market where competition is fierce. Prices that are too high will often drive customers to use competitors, set it too low, and there is a perceived lack of quality. Amongst others, there are three main pricing strategies to choose from; discount pricing, competitive or premium and they all have benefits and drawbacks – it’s a case of carefully weighing up the options.
If your business is just entering an already crowded market place, discounted prices make good sense as they can quickly increase your market share and the higher volume of sales will mean unit costs fall. Dropping your prices is also a great way to clear end of line or perishable goods that need to be turned over quickly. If there is little product differentiation, your low prices may even attract customers away from the competition, giving a valuable opportunity to build customer loyalty across your whole range – perhaps by offering excellent customer service or otherwise encouraging customers to engage with your brand.
Take advantage of other companies in your chosen market and study their pricing strategies. It is an excellent way to gauge at what level your prices should be set and the lack of price differentiation will avoid a price war. Once you have started to see a good return on investment you can fine-tune your prices accordingly and adjust your margins.
Once established, to see a higher turnover and an increase in customers it is often an excellent strategy to increase your prices above the average. This may seem counter-intuitive but customers often perceive that a product with a higher price is of better quality and therefore more attractive. If this works, you will benefit from the higher profit margins and if not, prices can always be reduced! Even better if there are barriers to competition such as targeting already loyal customers or a unique product. Use all these factors to your advantage.
Don’t try to compete directly with larger businesses if you are only small. Use your size to your advantage. Many customers now actively seek out smaller, more personable businesses to deal with, looking instead for excellent customer service, after sales support or other factors. See if you can present your offering from a different perspective or add value in a novel way to attract and engage your target audience. Such creativity and the exploration of new ideas, pays dividends.
Pricing across a range:
Most companies have more than one product or service to offer customers and there are various pricing strategies to use in these circumstances.
Keeping prices on a par with one another ensures your audience feels there is consistency across your range and can engender a feeling of security which drives loyalty.
Many companies find that a tiered pricing structure works very well, with a ‘budget, better and best’ approach. This widens the net for attracting as diverse a target audience as possible and allows you to reach different demographics.
There is one more essential to consider when setting pricing strategy and that is turnover. It’s essential to keep the revenue stream flowing, it’s sometimes better to sell a product with little profit margin and then benefit from repeat business in the form of after sales or other follow-up support.
So, choose your pricing structure, don’t be afraid to keep it fluid and make organic changes to respond to differing market pressures. You’ll soon be a force to be reckoned with!
If you need advice or further support, please don’t hesitate to contact our professional team on: 01392 927477