Pricing your products or services, your pricing strategy is one of the most important components of your marketing strategy. 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 a cost-plus approach and result in an underestimation of the market’s willingness to buy at any given price point.
How much your customer is willing to pay for your product has very little to do with cost and has more to do with how much they value the product or service they’re buying.
Selecting the right pricing strategy is key to the success of your business. The pricing strategy you choose should be dependent on the product lifecycle, your competition, what your buyers value and your business objectives. We can help you examine the factors that influence how you price your product or service.
Know which pricing strategies to use when selling your product or service. The strategy you choose is dependent on a number of factors, but most importantly, it must be attractive to your target market.
Penetration pricing is a pricing strategy that involves setting a low price to enter a competitive market and then raising it later.
Value-based pricing is achieved when you set a price that is based on how much you think your customer believes what you’re selling is worth.
Competitive pricing is an approach that is based on setting a price that is similar to what your competition charges.
An economy pricing strategy is an approach that delivers a no-frills low price for a lower quality product, where the costs of marketing and promoting a product are kept to a minimum.
Price skimming is when a company charges a higher price initially, then the price is forced down due to new market entrants with lower priced offerings.
Cost-plus pricing is exactly what is says. It is simply calculating your costs and adding a mark-up. This is probably the most common approach to pricing products and services.
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.
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.
OFFER PRICING STRATEGIES
It doesn’t matter what marketing tools you use to manage your prospect pipelines and your automation funnels. It is the marketing message and the offer that will grow your revenue. Craft a marketing message with an attractive offer that turns prospects into customers.
Tripwire offers are made to prospects who expressed an interest through a lead magnet. It’s an irresistible, unbelievably priced offer, that they can’t refuse. Then you can market your core offer to them.
Promotional offer 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.
OPTIONAL EXTRA OFFER
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.