Estimating the price of your product is undoubtedly one of your biggest challenges as an entrepreneur. The price you set can help you convert a suspect into a customer, or on the contrary hinder your business.
Generally, the higher the price of your product, the less people will pay for it. The reason is the overload of products similar to yours available on the market. To please your suspects, you must therefore offer them something totally innovative . Or, you can opt for slightly pricing strategies .
But what is a pricing strategy? It is all of decision-making processes related to pricing. So, you not only need to analyze how much your product should cost, but also how much your potential customers are willing to pay to obtain it.
There are many methods for setting a price. It all depends on your objectives and the means of your target audience.
Value-based pricing strategies
This pricing strategy is carried out based on the added or perceived value of your products or services. Pricing takes into account the consumer's perception and the interest of the product on the market . To implement a value-based pricing strategy, follow the following steps.
Study your target
The foundation of a good value-based pricing strategy is studying your market. Indeed, it is essential to know the customer's needs and provide them with something that meets them. So, consumer feedback is your best database .
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Keep an eye on your competitors
You absolutely must know the price of products similar to yours on the market. If the value created and the marketing of a product are not sufficient, the consumer will choose the least expensive one offered on the market. Examining the competition will also allow you to determine what might make your offering unique .
Determine the value of differentiation
Once the research phase is completed, it is necessary to highlight the quantitative value of the distinctive features of your product. Start by assigning an amount that reflects the market key features Add them up, the total sum will be the price of your product.
Cost-based pricing strategies
A cost-based pricing strategy is generally used to obtain a higher percentage of production . There are two main methods for this purpose.
The increased cost price
This strategy consists of the cost of production by a percentage to obtain the final price.
For example, to obtain a cost plus price, a sandwich shop will add up the total cost of its ingredients and labor. Then, it can set the price so as to obtain the expected profit margin .
However, this approach does not take into account external factors such as competition and market demand . However, if your markup percentage is too high, you risk missing out on sales. If, on the contrary, it is too low, you will miss good opportunities to make a profit.
The equilibrium price
The equilibrium price is set in proportion to production . Companies usually use this method to determine the number of units to sell to cover the manufacturing cost and generate profit.
Competitive pricing strategies
A competitive pricing strategy involves setting the cost of a product or service relative to the market rate. By analyzing competitor data, you will know how to be more competitive.
Any pricing that includes external factors must take competition into consideration. This strategy encompasses several pricing techniques.
The penetration price
This strategy consists of setting a price much lower than those of the competition in order to gain market share, and subsequently increase it.
The price of skimming
Here, the price is much higher than those of the competition so target an audience with high purchasing power. This price then decreases over time, depending on market development.
The high and low price
This method involves significantly reducing the price of a product . The decline occurs all at once and not gradually as in the skimming strategy.
