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

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