Most new business owners often overlook pricing when setting up their companies’ marketing strategies. However, pricing is the foundation of any successful marketing strategy.
But even after researching and formulating proper pricing strategies, most people tend to keep their prices static. Keeping your pricing strategy static is one of the worst mistakes you can commit as a business owner. That’s because even the slightest change in a pricing strategy could have a dramatic effect on your business’s conversion rate.
Like every great strategy, successful pricing strategies in marketing are only achieved through trial and error, as well as constant tweaks. Thus, one business’s failed plan could be another’s successful strategy. Below are seven pricing strategies in marketing every business should know:
1. Understand Your Customers
Identifying and visualizing your customer’s personas is an essential part of marketing. Creating a detailed list of your customer’s personalities will help you understand how much they would be willing to spend on your products.
Failing to profile your target customers correctly can lead to miscalculation and wrong prediction of your customers’ wants. It also leads to a slip-up and a miscalculation about how they feel regarding your products and services. This is quite a risk as you could alienate your primary audience through a wrong pricing strategy.
The main question you should be asking is, what do my customers value? Do your customers prefer having a subpar product at a lower price? Or are they willing to pay the price for premium services and products?
Pricing comes down to who you are selling your products to. Remember, you can’t be everything to everyone. Customers’ perception of your brand is influenced chiefly by your products’ quality and how much you charge.
2. Lower Product Prices May Not Be the Best
When you launch your business, it’s very tempting to lower your prices to capture customers and beat competitors. After all, you will be offering a good product but at a reduced price. While this may seem like an ideal strategy, pricing your product lower than competitors will hurt your business in the long run.
Customers perceive the price as an indicator of quality. While you may initially capture the customers’ attention with your irresistible prices, they may end up wondering whether there is something wrong with your products. Most people will wonder why you have to price your products lower than everyone else in the market.
Instead of attracting your targeted clients, you will be attracting customers who don’t care about quality, don’t have money to spend, or short-term customers.
3. Keep an Eye on Your Competitors
Competitor analysis is the easiest way to ace your pricing strategies in retail marketing and capitalize on their success. Unfortunately, most people only concentrate on what the competition is charging instead of what they are offering. The most important thing is to assess their products’ quality and try to match up or exceed it.
The question is; what can you offer your clients that competitors can’t? Can you offer a better quality product at a better price? Can you offer an extended warranty and guarantee that no other competitor can?
Equally, if you can’t offer the same quality of product as your competitors, you could lower your prices. However, remember to compare quality, services, and value, not just the prices.
4. Protect Your Business Against Price War
Small businesses and start-ups depend on high-profit margins to stay in business. This means it’s easier for bigger organizations to price them out.
A small business can’t produce goods at the same volume as a bigger corporation. Thus, smaller companies try to undercut the bigger organizations. This can spark a price war which is always disastrous for the smaller business.
So if you can’t price your products competitively, how are you supposed to protect your business from being undercut by the bigger corporations? Do the following:
- Turn your small production volume into an advantage by promoting exclusivity
- Look for value additions that bigger corporations can’t
- Build a strong brand
- Be consistent and create a relationship with your customers
After launching your business, look for your unique selling point and use it to your advantage. As long as you have something your competitors don’t, you can always retain your customers no matter what price fluctuations happen in your field.
5. Remember That Action Paralysis Can Negatively Impact Your Sales
Action paralysis is a concept of clients getting overwhelmed with too many product choices. This makes it impossible for them to settle on one option.
The action paralysis concept can impact your retail pricing strategy. If you are selling multiple products priced identically, customers may find it challenging to settle on one product. This impairs their decision-making ability; thus, they end up purchasing nothing from your store.
According to Yale University research, only 46% of people could make a purchasing decision after being presented with two packs of different brands of chewing gum priced at the same price. This number was significantly higher, 77%, after the chewing gums were priced differently.
6. Understand the Strength of Psychological Pricing
Psychological pricing is a concept and technique used by most marketers to encourage their consumers to make purchasing decisions based on impulse and emotions instead of logic. One example is pricing an object at $99 instead of $100. Even though the difference is $1, most people will perceive $99 to be more affordable than $100.
The main goal of psychological pricing is to capture the client’s emotions.
7. Bundle Pricing
This is the act of setting the price of many products lower than buying each product separately. One example is in local restaurants. It’s cheaper to buy a family pack meal than it is to purchase the items individually.
This is an effective competitive pricing strategy that also increases the business’s value perception in your customer’s eyes. You can also offer your clients deals and coupons on selected items using online deal websites. Check out this page for more online deals.
Employ the Above Pricing Strategies in Marketing
Employing the above pricing strategies in marketing can boost your sales and increase profits. Most fast-growing companies have implemented a few of these strategies. However, ensure that your pricing strategy in retail marketing takes into account the type of clients you’re looking to attract.
Did you find this article informative? Check out other posts for more business tips.