Product pricing is a key aspect of vendor-client communication. Correct product pricing boosts earnings and sets the foundation for commercial success. Conversely, getting the pricing strategy wrong can create problems that may well prove detrimental to an organizations long-term success.
Unfortunately, many entrepreneurs find pricing their products and service a challenging task. If they set too high a price, they risk losing sales while too little will affect the profit margin. What many purveyors fail to realize is that pricing is as much a matter of skill as it is a science.
Factors Involved In Product Pricing
When it comes to pricing, there is no guaranteed, all-purpose one-size-fits-all formula. Successful businesses are always testing new prices, new offers, and new combinations of benefits and premiums to help sell more of their product at a better price. A variety of different types of pricing strategies exist to suit the diversity of products, businesses and markets. Nevertheless, conventional product pricing usually involves considering certain key factors such as the internal costs, intended market segment, competitors pricings, etc.
Another fundamental factor for consideration is the organization’s specific corporate goals. Two companies in the same industry with similar products and internal cost structures can have completely different pricing policies depending on their overall corporate strategy.
Contradictions That Work
Experienced marketers are often aware of certain paradoxes of pricing that can help sellers of products and services earn more for the same amount of work. Some of these lesser-known strategies include:
1.Less Is Not Always More: many new entrepreneurs tend to price their products low in a bid to attract new customers. However, too low a price can create an impression of poor quality among the customers who tend to be suspicious of a price that seems too good to be true.
A good way to reduce costs without lowering the price is to offer less for the same price. This will help cut down on the expenses without appearing to reduce the value to the customer. This strategy has proven especially useful in the hospitality industry with restaurants serving smaller portion sizes at the same cost.
2.Do Not Automatically Abandon A Product Just Because It Does Not Sell Well: A close examination of consumer behaviour will show that most people tend to go for a product that is priced slightly lower than their most expensive option. Vendors can thus increase their sales by keeping on a more expensive product and allowing its presence to influence buyers to spend more.
3.Complaints Do Not Necessarily Mean You Are Wrong: Since conventional marketing wisdom considers complaints to be anathema, it is natural to consider lowering prices when customers try to negotiate a bargain. Nevertheless, such an assumption need not always be correct. People from certain cultures and regions simply regard this as normal business behaviour. By raising prices in response to complaints, companies can often attract customers who respect them more as vendors.
A good way of exploring new pricing methods is to experiment with new offers every couple of months. One method is to raise the price and simultaneously offer a unique bonus or special service for the customer. Take care to pay attention to any increase or decrease in the volume of sales and the total gross profit generated.
In summary, calibrating an items retail price is too often a study in conventional market psychology involving as it does both long-established beliefs on consumer behaviour as well as the marketers propensity for safe pricing methods. Yet such conservative ideas about pricing often pass up huge amounts of potential profits because they overlook some seemingly counter-intuitive principles on the subject. Taking a step off the beaten path and following these paradoxes of perceived value can well prove highly profitable and leave you comfortably ahead of the competition.