Marketing pricing strategy is challenging. But understanding the different pricing strategies businesses use can help you set realistic prices for your product or service, maximize your sales, and build a great reputation around your brand for providing a good product for a fair price.
According to Prisync, 60% of consumers consider pricing as the first criteria they assess in their buying decision. Getting your pricing strategy right can make or break a sale. In this post, we cover some of the top marketing pricing strategies, why they work, and how to implement them with your product or service.
Creating a marketing pricing strategy requires understanding consumer behaviour. You need to be deliberate in your decisions and avoid ‘winging it’ at all costs. With that being said, let's take a look at three tried-and-tested pricing strategies that could be the perfect choice for your business.
Do you sell luxury goods or services? Then a premium pricing strategy is where you want to focus.
A premium pricing strategy involves selling your goods or services for a much higher price than your competitors.
Premium pricing strategies are used for attracting a particular audience. By pricing your product higher than your competitors you are trying to cultivate the idea that your product is of a higher quality.
With premium pricing, you are looking for consumers who want to pay more to have the best. Often brands will look to create not only high-quality products or services but to include additional extras such as when an airline offers first-class seating for a higher price.
The obvious advantage to using a premium pricing strategy is that you can have higher profit margins. A higher price-per-unit means more revenue if your pricing strategy is done right and you generate a lot of sales.
When you go into a store and you want a refreshing beverage, you can buy a single can of Coke, or you also have the option to buy a six-pack. The unit cost of each can is lower when you purchase more, so this appeals to loyal customers.
A micro pricing strategy is essentially the opposite. It focuses on generating new customers. You sell your product or service for a small individual fee to help new customers overcome their fear of purchasing from a new brand. The smaller amount of money needing to be spent to try your product increases the chances that you will make a sale. You then hope to develop a strong relationship with that customer and turn them into a repeat customer who will purchase bulk products or services.
A marketing pricing strategy is something that every startup needs to look at when it is developing a marketing plan. However, startups are often at a disadvantage compared to established companies as they have no loyal customers. This means that if you are a startup, you need to approach pricing differently.
A good pricing strategy for a startup is a penetration strategy. This is an approach designed to quickly establish your brand in the market. You gain market share and new customers by offering a low price that undercuts your competitors.
As you establish yourself and build a loyal following, you can gradually increase your pricing. This can be a successful strategy in the long term by helping you push ahead of your competition. However, it is important to remember that with this strategy, in your early years, your startup may make a loss.
A marketing pricing strategy can make or break your products' success. You need to think carefully about your audience, what they are looking for, and how to entice them to make a purchase. You want to find the right balance between making a product and providing a price that consumers feel is fair.
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