No matter what type of business you run, pricing is one of the most important factors of your marketing strategy. Correct pricing can make your product or service a hit or a failure in the market. Here are a few pricing strategies to consider:
Generic or Economic pricing
In this strategy, the buyer is attracted by a low price. It is typical of generic or economy brands. For this strategy to prove successful, you should have a low cost structure, minimal features and promotion. Simultaneously, ensure that customers reap some solid, stable benefits. If you wish to go for an economy price strategy you will probably have to focus on selling increased volumes as margins are likely to be tight.
With this model, the idea is to set the price according to different buyer types, (e.g. the price will differ for an online, retail and a direct sales channel). Another consideration is geographical area as prices can be higher in London than in say, Leeds. Quantity also plays a part as a customer buying a larger volume of your product or service can get a better rate than a one-off purchase. A note of caution – there has to be a valid reason for applying differential pricing. For example – you can charge more in London on the basis that your staff costs are higher.
This strategy is applicable for luxury or high end goods or services such as expensive yachts, the very best legal services and so on. You can use this strategy if the market recognises your product or service as a luxury or premium item. Again, you should consider this strategy carefully and bear in mind who your clients and potential clients are.
Captive product or companion product pricing
This strategy focuses on bundling products or services into a package. Perhaps a product is a captive market – if you buy a mortgage you also need home insurance, for example. If you bundle the two products together as one package you are more likely to secure a sale of the two products. The prices of these products outside a package usually tend to be higher.
Remember to review your products and services carefully before choosing a particular strategy so that the pricing is appropriate for your target market. Research your competitors and benchmark for pricing.