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A business needs an effective pricing strategy to keep the sales figure raising and profit margins increasing. However, one of the pertinent questions is how to choose the right price point for the product and service. Many businesses put a price on their product without contemplating much. This is a grave mistake can lead to a financial loss.
Pricing always needs to be on the right track to keep the business on its foot up and running. Now, when we say that price is significant, it doesn’t always mean keeping a competitive price. It means knowing which kind of pricing can help you remain at the top of the business. And pricing intelligence companies like PriceIntelGuru can help you achieve the same goal in a stipulated time period.
Optimizing the pricing strategy with the help of price intelligence can help in getting the prices right. The pricing intelligence companies can help your business choose the right price which can help in increasing sales without losing customers to your competitors.
It might seem simple to set the prices; set the price higher than the cost of manufacturing or acquiring and you will make a profit. However, prices are never just the numbers. Your prices are also a reflection of your business identity, how you treat the competitors, and how much you value the customers.
In today’s blog, we will give you in-depth knowledge about the pricing strategies that you need to adopt for making the right decisions.
So, let us begin.
Factors To Consider When Setting The Pricing Strategy
1. Not Just About The Price
Setting the prices for your product should not be a decision that only focuses on the profit. It should be a well-calculated and informed decision wherein financial stability, brand, and business identity are taken into consideration. Also, it should take a better customer-centric approach to retain the customers with your brand or products.
2. Reaching The Business Goals
Fixing the prices begins with evaluating your own needs and goals first. Once the goals and needs are defined, you must do some research about the market you wish to enter. You must identify at least 3-5 competitors via online research or exploring the local business. Now, there may be many other competitors, but competing with every company might not be pragmatic. However, you need to focus on some with or whom you have more in common or you aspire to reach.
3. Study The Competition
Understanding the competitor strategies can help you differentiate your business from competitors. In a market where several businesses offer a similar product, you can stand out by designing a strategy with the help of pricing intelligence companies. Competition research takes a lot more than just a manual search. You must have a better understanding about their pricing strategies, marketing moves, discount offers and customer reactions.
4. Understanding The Customers
The research should also consist of speaking with the prospective customers. This will help in knowing how they value your brand and product. You can set your prices based on this input. You can conduct this type of competitor pricing research via form surveys or casual conversations. Consumer behavior always should be the main focus of every company. Studying them can only benefit you in making a product or delivering a service that’s more customer-driven than profit-driven. A consistent approach toward happy and satisfied customers can go a long way. Pricing intelligence companies can help you understand customer behavior on the internet by suggesting the most searched keywords on any eCommerce platforms, or SERPs. This is an advanced way of doing customer research as many shoppers are online buyers, so you need newer ways to influence their buying decision.
Significance Of A Great Pricing Strategy
When you design an effective business pricing strategy with the help of pricing intelligence companies, it can benefit in the following manner:
1. Perceived Value
When we use the word cheap for a product, it can mean that either the product is priced cheaply or it is poor in quality. Many people associate cheaper prices with cheaper products. On the other hand, products with higher prices are perceived to have higher value or better quality. Now, this is a common phenomenon, that people have a perceived value for every brand. That’s because the company has put in efforts for creating a brand that is positioned in such a manner that it has a top-of-mind recall for utility.
2. Influence Customer Buying Decision
A higher price might be considered as higher value by customers but if it is more than what customers intend to pay, they won’t buy the product/ service even with that perceived value. As the budget exceeds the perception of a brand. On the other hand, customers will ignore your product if the price is too cheap. Here also, the customer’s budget plays a vital role.
For instance, a shopper is having a budget of $500. And he is willing to spend that much amount of money on a product. So, if something comes in say $350, he will look for better options out there. In a nutshell, it is only an ideal price which can make people buy your product/ service over competitors offering similar items.
3. Instill Faith For Your Product
When your products are priced ideally, it will give your customer the faith to buy your product. If the prices are too high or too low, they are more likely to switch to a competitor.
If the pricing strategy is weak, it doesn’t reflect the right value of your product. The customers feel confused about buying from you and the price doesn’t allow you to target the right customers.
Top Pricing Strategies For Your Product
Based on the product category you deal in and the market you wish to win, the pricing intelligence companies will help in choosing the perfect business pricing strategy for your business.
1. Value-Based Pricing
In this type of pricing, you set the prices depending on the customer’s perception of your worth. For SaaS businesses, this can be an excellent strategy.
2. Competitive Pricing
In competitive pricing strategy, you are pricing the products based on how much competitors are charging. This can be a useful strategy when you are starting your business. However, this type of pricing strategy doesn’t leave much room for growth.
3. Price Skimming
In a price skimming strategy, you set the prices as high as possible and then lower them overtime. The idea is to sell the product first at higher prices and then reach others at lower prices. It can work with the right product.
For instance, Apple launches its iPhone at a premium price, then as another version is launched, t]he prices of the previous one go down. Now, that is done by almost all smartphone companies. It makes a customer go for an updated, newer and latest version of the smartphone than he/she is already having.
4. Cost-Plus Pricing
It is a simple pricing strategy wherein you take the product price and add a certain percentage to it. However, it is not ideal for physical products.
5. Penetration Pricing
In a competitive market, it can be difficult for new companies to set foot. New businesses can enter the market by setting prices lower than the competitors. This is known as penetration pricing. However, you will need several customers for the strategy to work and need them to be loyal when you increase the prices in the future.
6. Economy Pricing
This type of pricing strategy is quite popular in the commodity sector. The idea is to price the goods cheaper than your competitors and make money by increasing the volume. It might work for some businesses, but it might not be ideal for SaaS and subscription-based businesses.
7. Dynamic Pricing
In dynamic pricing strategy, you constantly change the prices for meeting the current demands for the products. It can work well for the SaaS and subscription business as customers expect consistent yearly or monthly expenses. This is also seen for groceries and many other essentials like petrol and diesel. Now, this is the varied expense that a customer expects to change.
Which Business Pricing Strategy Is Right For You?
All of these pricing strategies have their own benefits and downsides. You should at least consider that the pricing strategy you choose covers the cost and some profit margin. Deciding your needs and goals can help in choosing the perfect strategy for your business.
Further, pricing intelligence companies can help you choose the right strategy. They have the required knowledge, expertise, and software which can help in making perfect choices.
Take The Right Pick
If you have launched your business, you can experiment with these strategies till you find the best fit. You can also choose different strategies depending on the product and market for each good/ service. It is better to find a price range instead of struggling to find a specific number. Contact PriceIntelGuru for great ground-breaking strategies that can help you lead the way in the market. So, what are you waiting for, contact us today or Book a free demo!