Do u feel that choosing the right pricing strategy for your brand is a daunting task? Rest assured, you are not alone in this dilemma. A considerable amount of calculations and brain-storming are involved while setting up the price for a product or service. Companies evaluate various factors such as the costs involved, ROI, competitor pricing, and profit margin to name a few while comparing the types of pricing strategies that are best suited for their offerings. The pricing strategy that you set also has a great impact on the positioning and marketing of your brand. So, it is crucial for companies to carefully evaluate the different types of pricing strategies and weigh the pros and cons of each before finalizing the most suitable option.
To learn more about how different types of pricing strategies affect your business and which pricing strategies that will yield maximum returns, speak to an expert.
Types of Pricing Strategies
The following are five common types of pricing strategies that are followed by top companies while fixing the prices for their offerings:
In penetration pricing, brands make the market entry at a comparatively lower price than the competitors. These types of pricing strategies are used to attract more customers and to make the customer switch from current brands existing in the market. Penetration pricing strategies primarily target price-sensitive customers, whose buying decisions are largely based on the product prices. Once companies manage to capture a considerably good market share with penetration pricing, they can slowly start increasing the prices.
These pricing strategies are used by companies while entering into a new and unique market. In the initial stages, the products are priced on the higher end. The whole idea behind such pricing strategies is to maximize the profits for early adopters before competitors enter the market and make the product more price sensitive. By initially pricing the products on the higher end, businesses can not only recover their development costs but also gives the product perception of being an exclusive and premium product.
Don’t we all just love the buy 1 get 1 free offer in retail stores? These are types of pricing strategies that are adopted by companies where one product is combined with another product and offered as a deal. These techniques are often adopted by retailers as a measure to clear-off excess stock. Selling products as a deal induce higher customer purchase and result in faster selling of products.
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Premium pricing is also often referred to as prestige pricing or image pricing. These types of pricing strategies are undertaken in the case of high-end luxury products. The idea of premium pricing is to encourage the perception of superiority and better utility of a product in the minds of the customers when compared to similar products that are priced at a lower value. The key advantages of a premium pricing strategy are that it produces higher revenue and builds a premium brand image.
Economy pricing strategies take a very low-cost approach. This is a no-frills pricing strategy that is usually followed by generic food suppliers and retailers. They tend to keep the prices at the minimum margin. This is done by cutting down excessive spending and marketing expenses. This type of pricing strategy is best suited to attract the price-conscious lot. The key to success in this type of pricing strategy is to sell large volumes of products and services at a lower price.