17/02/23
7'
Lately, many businesses have faced challenges due to the high inflation rate resulting in costs of goods and services increasing at an average rate of 2.3% annually over the last decade. As sellers and business owners, it’s important to choose the right pricing strategies to ensure that your business remains profitable.
To make the right choice, it is mandatory to understand the different pricing strategies available, and the pros and the cons of each.
Market demand, competitors’ prices, and production costs are the factors you need to consider while developing a pricing strategy. Keeping in mind how these factors can influence your pricing strategy will help you maintain profitability and growth in the face of inflation.
In this article, we will walk you through the definition of pricing strategies, the pros, and cons, and how you can choose among the 5 most common pricing strategies that will help you stay ahead of your competitors.
Pricing strategy or price setting is one of the most important parts of the marketing process and it requires deep market research. In this matter, the right price can generate more sales while the wrong price can make potential customers purchase in other stores.
On the other hand, a pricing strategy is a method used by large or small companies to price their products or services based on production costs, advertising expenses, and many other factors like competitors’ actions and the financial capacity of the consumer.
In this short guide, we will approach these 5 major and most common pricing strategies:
Dynamic pricing is a pricing method where you adjust your prices based on real time market conditions such as demand and respect your profit margin by using a price intelligence software.
Pros 👍
The Cons 👎
Cost-based pricing is a pricing technique based on manufacturing costs, however, a profit level must be applied in order to define the product price.
Many companies use this technique to find a price range between the floor price which is the minimum price and the ceiling price which represents the maximum price.
The Pros 👍
The Cons 👎
Value-based pricing is a pricing strategy that involves setting prices based on customers’ perception of the products or services and the benefits it provides to consumers. It is about finding the price that your customers are willing to pay.
The Pros 👍
The Cons 👎
Competition-based pricing strategy is based on what prices the competition is setting and this strategy is used mostly by businesses selling similar products.
Unlike services that can vary from business to business, the features of a product, however, need to remain similar in highly competitive markets. In this case, a competitor price monitoring software will allow you to remain competitive since you can have an overview of your rivals’ product prices all the time and adjust your prices accordingly.
The Pros 👍
The Cons 👎
SoBrico is using Netrivals competitive intelligence to improve its pri…
Learn morePenetration pricing strategy is when a company attempts to grow in a market through the delivery of existing products in existing markets and involves low prices to attract customers and gain a high market share.
The Pros 👍
The Cons 👎
Choosing the right pricing strategy is mandatory for your business in order to remain profitable in inflationary times. Above we mentioned the 5 common pricing strategies, each strategy mentioned has its own advantages and disadvantages, and it’s important for businesses to choose the best pricing strategy that fits their products and market conditions.
The ultimate strategy to succeed in your business goals is to target the right audience and understand the value that may come with it, and how you can provide your customers the best value.
Keep in mind that finding the right pricing strategy means adapting to your industry, as well as your company’s unique objectives in order to have clear expectations on how much customers are willing to pay and invest for your products.
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