INCREASE TURNOVERThe P that impacts profit.
Selecting the right pricing strategy is key to the success of your business. It’s the only element in the marketing mix that has a direct impact on determining turnover.
The pricing strategy you choose should be dependent on the product lifecycle, the situation you are in and your business objectives. We can help you examine the factors that influence how you price your product or service.
Price is a versatile element of the marketing mix, yet selecting a price strategy gets a fraction of the attention needed. Often, marketing departments are removed from the price setting process, which sometimes means that critical factors are not researched before a price is set. It can mean the focus is purely on financial objectives and result in an underestimation of the market’s willingness to buy at any given price point.
Luxury products, or products with unique qualities, use a high price. This approach is appropriate where a substantial competitive advantage exists and the marketer is safe in the knowledge that they can charge a relatively high price. However, luxury brands such as Burberry and Armani are faced with the challenge of delivering a luxury customer experience online.
This is a no-frills low price for a lower quality product where the costs of marketing and promoting a product are kept to a minimum. The Tesco value range of products is a good example of economy pricing.
Promotional pricing is probably the most commonly used pricing tactic. We’ve all seen the lure of promotional pricing such as BOGOF (Buy One Get One Free), money off vouchers and discounts. Although it’s a simple tactic and easy to implement, it can also be a tactic that can damage a brand, especially if there’s no planning behind discounts that are offered.
PRODUCT BUNDLING PRICING
Combining several products into a bundle can create an attractive offer. It’s a good way of moving slow selling products, and in a way, is another form of promotional pricing. It can also be used in competitive markets, making it difficult for buyers to conduct a direct comparison with a competitor’s offering. Bundled pricing is commonly used in telecoms, with service providers offering devices, voice minutes, texts and data in a bundled offer.
OPTIONAL PRODUCT PRICING
Optional extras are offered to increase a customer’s overall spend after they make their initial purchase. This is an effective way of gaining a customer by offering a competitive price, then tempting them to spend more through extra add-ons. Budget Airlines or Cruises are great at this pricing tactic. Once you book your seat or cabin, you are tempted to spend extra money to choose your specific location on the plane or ship and get all of your luggage on board. Then once you are on board, they continue to tempt you.
Price skimming is when a company charges a higher price only because it has a substantial competitive advantage. Usually, they are first to market with a new product, however, the advantage tends not to be sustainable, and the price is forced down due to new market entrants with lower priced offerings. The electronics and technology markets are known for price skimming pricing strategies.
Offering value for money is commonly used where external factors such as a difficult economy or increased competition force companies to provide value products and services to retain customers and sales. Lowering a price does not simply increase value. For value pricing to work, the product offering must offer the buyer added value.
New term, old tactic. Tripwire offers are made to prospects who expressed an interest through a lead magnet. It turns prospects into paying customers. It’s an irresistible, unbelievably priced offer that tempts the prospect to part with their cash. They become customers. Then you can market your core offer to them.
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If you require any assistance with creating your pricing strategy, we are happy to help.