There is a price for everything in this world whether it’s tangible or intangible. Nothing comes free in life. If something comes free then remember, you must have paid something for it before. All these sentences summed up the fact that how much Pricing is important. If you can’t set the price well for any product, it won’t be sold or it will lose its value. We give you an example, consider a BMW 5 series and a Toyota Prius. If the BMW 5 series were priced similar to a Toyota Prius, it would lose its core value.
On the other hand, if a Toyota Prius was priced as high as a BMW 5 series, people might not want to buy it and ultimately it would lose its market. So, to let you know about pricing strategies, we have gathered some points that will help you to set the perfect price for your product.
How Prices Should be Set for Your Product
Variations of Pricing Strategies for Any Product or Service
It takes more than just to calculate and add an extra markup over the cost of your product. If you want to set a proper price, you need to decide first in which segment you want to put your product into the consumer’s mind. Consumers will pay for the product entirely depends on what kind of value they are adding to your product. Like during the Covid-19 pandemic, masks and tissue paper were sold for a good price where in other times, they are usually labeled as consumer neglected products. So setting the price has very little to do with the cost of the product. Usually, in general, pricing strategies are 5 types, but if you want to know more, there 14 types of strategies to set up a price for a product.
So first, we are going to cover these 14 types of strategies here, and then we will discuss those main five strategies which are usually popular.
Competition-Based Pricing Strategy:
This kind of pricing strategy is set without taking account of anything else other than their current market price. For instance, fruit sellers first have to know about the current price of the fruit market to set his fruit price, there is a point below which he can’t go or a point above which he doesn’t go because of the market settled price.
This pricing strategy is usually set by adding a markup on the basic cost of the product. If you are aware of COGS (Cost of Goods Sold) then this term is mainly used to set the price using this strategy. Usually, service providers like Barbershops or massage shops set their prices using this strategy.
This pricing strategy would be more popular for you if you use smartphones on regular basis. There is some app which is free in the market, but you can use certain features or get a trial period to use that app. If you want the full version, you have to pay. This is Freemium pricing, you get the basic free but to get full, you need to pay.
This Pricing is more like luxury pricing, high pricing. This pricing strategy is usually used for products that hold a top image in their line. Usually, they are priced more than their competitors. Technology and Fashion and are usually priced using this strategy
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This strategy targets human psychology to increase sales. For example, a term called the 9-digit effect is written as $99.99 when the price of the product is $100. The customer who will buy it may think it is a good deal for the 9 digits.
In this pricing strategy, the price fluctuates based on market demand. It’s like a flexible pricing strategy that is randomly priced without any specific fixed digit. Usually, hotels, airlines, or event venues use this strategy to shift the price.
This pricing strategy is like when a company is selling a product at a high price, but then eventually reduces the price when it reaches its decline stage or loses its value. Every year phone manufacturers sell their phones at a high price in the beginning and then lessen them when a new model comes out. This strategy is also named a discount strategy.
This pricing strategy gets contrasts with skimming pricing. The thing that differentiates it is that companies enter the market at a very low price, as low as competitors can’t even compete. This strategy is used to draw the attention of the customers. However, they increase the price when they capture the whole market.
This pricing strategy is used for mainly freelancers and consultants who work by the hour. They are charged for how many times they work and get money according to that amount. In some companies, Labor is also given their salary based on this strategy.
This pricing is used when a company offers a new product in the market and as the highest possible price for it. But with time goes by and the category gets fade, they reduce the price. Usually, early DVD technologies and cellular devices were charged using this pricing strategy.
When a product is offered with extra products or complementary products and charged less than their actual price is called bundle pricing. This is a popular pricing strategy and used in a variety of products. For instance, sometimes TV and speaker are sold in a bundle and offered a certain amount of discount on their combined price.
We can say that all these pricing strategies are used in most products we buy in our everyday life. Following a proper pricing strategy helps a company to increase its sales.
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