Good pricing strategy helps you determine the price point at which you can maximize profits on sales of your products or services. When setting prices, a business owner needs to consider a wide range of factors including production and distribution costs, competitor offerings, positioning strategies and the business’ target customer base.
Pricing at a Premium
Businesses set costs higher than their competitors
Price Skimming
Set prices high during introductory phase, then gradually lower prices as competitors appear
Psychology Pricing
This is a technique used to encourage customers to respond on emotional levels rather than logical ones.
- The goal is to increase demand by creating an illusion of enhanced value for the consumer
- Setting the price of a watch at $199 attracts more consumers than setting it at $200, even though the true difference in price is quite small.
Pricing for Market Penetration
Penetration strategies attract buyers by offering lower prices
Bundle Pricing
Sell multiple products for a lower rate than consumers would face if they purchased each item individually
- Increase value perception of your product
- More effective for companies that sell complimentary products
- Keep in mind that profits earned on higher-value items must make up for losses on the lower-value product
Economy Pricing
Attract the most price-conscious consumers
- Minimize costs associated with marketing and production in order to keep product prices down
- Can be effective for large companies like Wal-Mart and Target
- Small businesses may struggle to generate a sufficient profit when prices are too low
