Using the correct pricing strategy or method to price your product is one of the most crucial parts of starting a business. There are various price optimization methods to suit all different types of services. Additionally, there are a number of different repricing methods to keep your prices up to date after you’ve laid down a solid pricing foundation.
Which Pricing Strategy is Right for You?
This is the most common and basic way to price products. Cost plus pricing takes into account all of your costs (production, marketing, wages) and then adds a profit percentage on to this figure to give your final retail price. Cost Plus Pricing ensures that your product will set at a profit.
Value Based Pricing
This is mainly used for innovative or unique products and services. Prices are set according to the demand of your product. When used properly, this method can increase profits considerably without affecting sales. Setting high prices according to demand may even make your product appear more desirable to customers – Sometimes a low price gives the impression of low quality.
Target Based Pricing
This pricing method is used to make a target return on investment. It’s best to have a prediction of expected sales in mind first. Once you have an idea of expected sales, you can price your product accordingly to make back part or all of your investment.
Keep up to date with your pricing! Once you have a basic price figured out for your service, you can use automatic price updating and repricing to adapt to current affairs, changing demands or competition.
It’s important to know what your competition is doing. Maybe you want to follow their prices and copy them yourself, price higher for a stronger brand image or, most commonly, price lower to attract more customers. You can use automatic price updating and dynamic repricing with The Repricing Company price tracking service to stay on top of what’s going on with your competitors.
There are a couple of methods you can use to tempt customers that extra little bit more to tip them over the edge into buying. Setting prices fractionally lower – such as £5 to £4.99 – can make a product appear much better value at a glance. Obviously some customers love a cheap bargain, however other types of customers may actually find higher prices more appealing, perhaps more fashionable or more professional. Setting prices according to the type of customer you wish to attract is very important.