Product pricing does not only determine a business’ profit, but also the flow of goods and the market it should target. Setting the right price for a product or service is tough with factors such as value, distribution costs, and competitor offerings.
Learn how to price a product or service right by taking note of the following strategies:
Also known as 'image pricing' or 'privilege pricing', premium pricing is the pricing of a product above normal market value. This kind of pricing is ideal for businesses that sell unique products and/or services. Some businesses think that premium pricing may dissuade buyers because of its exclusivity, when, in fact, it is highly advantageous because of its increased visibility. Premium priced products appear more desirable for customers as they see them prestigious and one-of-a-kind. In addition, this strategy allows companies to fend off their competitors in the marketplace.
Economy pricing is one of the most popular pricing strategies in the market as it primarily attracts price-conscious consumers, aka customers on a budget. Businesses such as food suppliers and discount retailers utilise this kind of pricing by lowering marketing and production costs, which in turn allows them to keep their prices down. A few businesses also use estimating and costing software to determine the ideal economy pricing for their products and/or services.
Ever wonder why retailers price their products in amounts such as $99.95, $44.99 or even $3.75? Cents might make no difference for consumers, but they make a whole lot of sense for businesses. This strategy is psychological pricing, a technique that marketers use to encourage consumers to respond on emotional levels rather than logical ones. Setting the price of a blanket at $49.50 than $50 attracts more consumers as they put more attention on the first number on the price tag than the last. The illusion increases the demand as consumers think that they are able to save on certain goods.
When pricing a product, determine the right strategy for your business and make sure to consider long-term plans and goals. Doing this does not only prepare your company for the future but also secures your revenue.