Overland Park Marketing state how marketing is not just advertising, it is also pricing strategy. Promoting your products may help get them in front of customers, but how you price them has an even bigger effect on a person’s decision to make a purchase. There are several things you should consider when creating a pricing strategy for your business:
Shop2Grab understand how competition in online business grows tougher and tougher each day, with more brands using smart techniques and campaigns to lure customers to their products, it can be a challenging task to sell your products without having the right strategy in place. In order to ensure the longevity of your business, it is vital to include information about your brand reputation, details of your customer’s profile and a comprehensive pricing strategy. Here’s a few tips on how to develop a successful pricing strategy for your products:
- Know your brand reputation and USP
Understand how your customer base perceives your brand. What would they describe you as? A little research can help you understand their perception of you, your USP and your weaknesses. Work on the grey areas from this research information and strengthen your USP. You also need to understand the kind of products you are selling and keep your strategy focussed, through keyword rich content integration and the use of other tools that help you reach out to your core customer base.
- Offering discounts
Another important way to lure in your customers is by offering discounts. While designing discounts keep in mind that pricing your products too low may set unrealistic expectations from your brand and make your business highly unsustainable. So try and price your products that offer a lesser margin as compared to your competition but do not affect your profits or your business.
- Incentivising business
Deploy time based sales to obtain more profit. You will find a lot of competitors putting a timeline to their sales so as to create a sense of urgency in the mind of the customer. You could use ads stating “ Buy 2 and get 50 per cent off” to draw customers’ attention and make good sales during this period. What you need here is a good pricing strategy that allows you to cut down on the price of a product, strategically, without affecting the business and also keeping the customer happy.
Keep track on the current happenings in the e-commerce segment by staying alert about all trends. Follow all e-commerce news and check using the Google Analytics tool to understand how your strategies are working on your customers.
For many years, price positioning was basically reduced to the question how effective prices of products and services should be set compared to competitors. However, during the last decade of pricing, a new and a lot more complex perspective on price positioning has gained ground: the price and value perception. This development was based on the insight that one of the most important drivers of a customer’s price satisfaction is the perceived price-value-ratio.
A simple yet useful model that can be used to determine ones price-value ratio and though define ones price position in a certain market is called value map. The basic model of a value map is shown below:
The value map includes 3 key elements:
- Perceived price: Price perception is mainly driven by eight factors (price interest, price estimation, price knowledge, price image, willingness to pay, effective price, price preferences, price satisfaction).
- Perceived value: The dimensions of perceived value differ from company to company. The key question is always: which elements of the company’s value proposition are important for the customers and are therefore perceived as a benefit?
- Price-value-ratio: The buying decision of your customers depends on the price-value-ratio, meaning they compare the perceived price to the perceived value. More specifically: long-term success for companies is only possible if your position is inside the price-value corridor, which indicates fairness to customers.
Our experience shows that only very few companies have access to all that information, neither for their own company nor for their competitors. Therefore gathering the required customer and competitor insight is the first step. Based on this data the current price position in the value map can be derived. Depending on the price strategy and the position of competitors, the target position can be defined.
Bizcrowd uncovers the right pricing strategy is crucial to a business’ success. More importantly getting your pricing strategy right, amongst anything else. Whether you’re dealing with products or services, pricing is something you can not visualise or realise in your own mind, until you are actually attempting to sell something. The following are mistakes you should NOT do:
- Mistake 1:
Basing your prices on your competitors
You don’t know how they’ve come up with that price; it might be a loss leader that they’ve already factored into their marketing budget.
- Mistake 2:
Lowering your prices to match competitors
Again, they could lower their prices for reasons that don’t necessarily align with your goals, and will have factored losses into their budgets that you hadn’t considered.
- Mistake 3:
Deciding prices just before you start trading
It’s dangerous because you don’t have a real-time idea of the costs of acquisition and development, research, meetings, phone and computer usage, and therefore will not know if your price represents value to the customer.
- Mistake 4:
Using low prices as your core business model
There’s a place for this tactic to gain new customers; however, basing your business model on this is dangerous. You’re not necessarily building a foundation of loyal customers, rather those that are only on the lookout for bargains.
- Mistake 5:
Not building customer services into costs
Excellent customer service is an invaluable commodity in itself. Providing value for money to your customers by giving them great service is of course of paramount importance, but don’t undersell the cost of service to yourself.
- Mistake 6:
Underpricing a services
Remember that a service, unlike a product, is intangible, so people tend to judge the quality of your service on two factors – recommendations and price. If you underprice your service it can appear ‘cheap’ and inadvertently turn people off.
- Mistake 7:
Not asking your customers
If you need some gauge on your value for money offering, ask your customers, or you may find you’re losing sales because you have not adapted to their needs. Providing value for money requires constant monitoring. Offering free trials of a product or service at the start of trading is one method of testing the water from the outset, but can create a culture of ‘freebies’ that would not necessarily convert into enough paying customers. Indeed, you need to gauge both value for money and how your product or service fits with the values of your customers.
Read more at: https://bizcrowd.com/Article/877?noticeboardId=0
Forbes answers one of the most common questions received from live audiences and emails, how to price services? The following steps can help uncover how to price your services and in turn increase revenue:
- Price anchoring
Price anchoring starts with a high price, and then offers the purchaser a discount; this creates the illusion of value. While this approach can be very effective in the business to consumer (B2C) environment, when selling services, the buyer might think “What’s wrong with their service if they are discounting it?” If you win on price today, you’ll probably lose it a year from now on price. If you win on value, a competitor with a lower price might not be enough to pull the client away from you.
- Hourly or project pricing
Recognize that when you charge by the hour, you are selling effort not results. Hourly billing is the fastest way to turn your services into a commodity. Realize that when you charge by the hour, the client pays more when you are less efficient. The faster you deliver what they need, the less they pay. That’s backward. Nobody ever sat at their desk hoping for 12 hours of your time. Clients want results. If your business allows you to focus on results with your client, then manage your interactions to focus on results instead of resources.
- Low bidder and change orders
If you know the client is considering alternatives, you might be tempted to propose a low, fixed cost. You’ll win as the low bidder.Then, once they need changes, you can charge a premium for the additional work. The problem with this approach is that you are consciously engaged in a bait-and-switch business model. It’s tough to build long-term customer loyalty when your client feels they always have to guard their wallet. The way to get out of this trap is to discuss (early – before the procurement comes out) the notion that their results matter. Not every client will appreciate your approach. But, the ones who do will want to figure out how to work with you.
Chron discuss how your pricing strategy affects customers and their perceptions of the value of your products. Consequently, this makes decisions about pricing crucial to reaching break-even and becoming profitable. While long-term business plans set the general direction, no single strategy works for every product or service your business offers for sale. Instead, pricing strategies tend to differ according to marketing objectives and a products place within its life cycle. The following can help in achieving a better pricing strategy:
- Analyse the product or service
Begin with analysing aspects and characteristics of the product or service that affect pricing decisions. Review your marketing plan and marketing mix decisions, such as how you intend to approach promotion and distribution. Include the target market, product costs, estimated or actual consumer demand and both direct and indirect competition in your analysis.
- Set pricing goals
Move forward in identifying an appropriate pricing strategy by setting pricing goals. In addition to linking closely to the product life cycle stage, most strategies relate in some way to market share or penetration, cost control and profitability. For example, sales revenue and distribution maximization, quality leadership and maintaining the status-quo are among the most common pricing goals.
- Research pricing strategies
Research and become familiar with the focus and characteristics of different pricing strategies. Examples of different strategies to research are price skimming, promotional, penetration, economy. psychological, product line and product bundling and value pricing strategies. It is important to research pricing strategies carefully.
- Identify the appropriate strategy
The right pricing strategy for a product or service might not be a single strategy. Instead, the most appropriate strategy might be to combine two or more strategies into one.
Read more at: http://smallbusiness.chron.com/identify-appropriate-price-strategy-80543.html
Learn how Stratinis can endeavour to optimize and manage your prices through our pricing software
McKinsey&Company see well-managed companies already recognize the critical role pricing plays in driving performance. A foundation that underpins excellence in pricing is the key to realizing its potential. Over the past two decades, most companies have recognized the bottom-line impact to be gained through effective pricing. Yet awareness by itself is not enough. Tapping the full promise of pricing requires an infrastructure to drive real and sustained pricing performance. With such a foundation, you have the ability to establish and strengthen pricing activities by creating deliberate decision processes, a specialized pricing organization, mechanisms that appropriately measure and reward pricing excellence, and robust support tools and systems.
Successful companies deliberately build a strong pricing infrastructure that underpins and sustains pricing excellence. They start by focusing on the most critical pricing processes, then consider who “owns” and drives the organization’s pricing profit centre. A constant focus on performance management inspires managers to improve their pricing performance in the context of the overall business strategy, while holding them accountable to meet or exceed expectations. Finally, systems and tools facilitate pricing processes, help people in the pricing organization raise their game, and support performance management. Implementing these elements in this order—processes, organization, performance management, and systems and tools—increases the likelihood that pricing-infrastructure investments will have an enduring impact.
The following elements are key to building a better pricing infrastructure:
- Well-defined pricing processes
- High-calibre organisational elements
- Performance-management systems
- Pricing systems and tools
Changes to a pricing strategy can bring benefits with a relatively small amount of effort. On the other hand, the wrong moves in pricing can have an equally outsize effect. This is why so many companies leave pricing untouched, even when they know a new approach may be needed. For them, pricing is an unknown and as long as it’s not completely broken, they feel that they can work around any pricing inefficiencies. As a result, they are likely leaving a lot of value on the table.
Pricing decisions can have important consequences for the marketing organization and the attention given by the marketer to pricing is just as important as the attention given to more recognizable marketing activities. KnowThis identify the steps as to why pricing is so important:
- Most Flexible Marketing Mix Variable
For marketers price is the most adjustable of all marketing decisions. Unlike product and distribution decisions, which can take months or years to change. The flexibility of pricing decisions is particularly important in times when the marketer seeks to quickly stimulate demand or respond to competitor price actions.
- Setting the Right Price
Pricing decisions made hastily without sufficient research, analysis, and strategic evaluation can lead to the marketing organization losing revenue. Prices set too low may mean the company is missing out on additional profits that could be earned if the target market is willing to spend more to acquire the product. Prices set too high can also impact revenue as it prevents interested customers from purchasing the product. Setting the right price level often takes considerable market knowledge and, especially with new products, testing of different pricing options.
- Trigger of First Impressions
Often times customers perception of a product is formed as soon as they learn the price, such as when a product is first seen when walking down the aisle of a store. While the final decision to make a purchase may be based on the value offered by the entire product, it is possible the customer will not evaluate a marketer’s product at all based on price alone. It is important for marketers to know if customers are more likely to dismiss a product when all they know is its price. If so, pricing may become the most important of all marketing decisions if it can be shown that customers are avoiding learning more about the product because of the price.
- Important Part of Sales Promotion
Many times price adjustments are part of sales promotions that lower price for a short term to stimulate interest in the product. Marketers must guard against the temptation to adjust prices too frequently, since continually increasing and decreasing price can lead customers to be conditioned to anticipate price reductions; consequently, withhold purchase until the price reduction occurs again.