What is a Pricing Strategy?
What is the definition of a pricing strategy? A pricing strategy is a flexible pricing technique that organizations use to determine how much to charge customers for products and services. In general, companies need to set pricing strategies to gain a sustainable competitive advantage in a market. Without pricing strategies, it’s tough to generate profits for your business.
Purpose of Establishing a Balanced Pricing Strategy
Establishing a rewarding pricing strategy is the key to growing a business. However, establishing reasonable prices is equally important. You must keep your customers happy. Therefore, you shouldn’t list your product(s) too high; your product(s) will sit on the shelf if their too expensive. Conversely, you should not list your products and services too low because you need to earn a profit. Hence, you need to establish a balanced pricing strategy to compete in the market.
In addition, establishing a balanced price enables you to grow your business. It helps you develop long term relationships with customers. Setting balanced prices also enables your organization to establish your market position. More importantly, establishing a solid price to charge customers helps your business achieve organizational market goals and objectives.
In the end, your customers should make statements like: “I purchase [your brand] because it’s worth the money”. Thence, not only are you marketing your products, but your customers are as well.
How to Develop a Competitive Pricing Strategy
The success of your business depends on the implementation of a successful pricing strategy. When it comes to buying and selling, there’s no such thing as short cuts. In other words, providing customer value is the only way to attain sustainable success. Therefore, you must establish reasonable prices to charge consumers.
Companies that satisfy customer needs, wants and expectations naturally develop the competitive strategy because their customers become physiologically, physically or emotionally driven to purchase their products or services.Dejuan Jones
However, the good news is, it’s easy to develop a competitive pricing strategy. There are no secrets to developing a productive pricing strategy. Any company or entrepreneur can apply this simple technique “treat others how you want to be treated”. Or simply establish prices through two perspectives, your perspective and the customer’s.
Define Your Purpose of Pricing Products and Services
The first action is to identify your purpose of pricing. For instance, are you introducing a new product or service to the market? Or are you revising the price of existing goods. You must define your purpose to identify pricing strategies that will help you achieve your marketing objectives.
Identify the Price Median
Nextly, you must identify the price median. The price median is the dollar amount in the middle. To identify the median, you need to find the median between the price floor and the price ceiling. This process is known as a balanced pricing strategy. Here are a few elements to consider when identifying your price median:
- The financial goals of your company
- Likelihood of customers purchasing your product(s) for the listed price
- Value of product from a customer’s perspective
- Price of similar products
What is the importance of identifying the price median? For newcomers, some customers tend to make educated choices when buying items. These customers don’t purchase the most expensive products because they’re too costly. Nor do they purchase the cheapest products. Therefore, setting your prices in the middle will increase the likelihood of customer purchases.