Pricing strategies are a sometimes-overlooked part of the marketing mix. They can have a large impact on profit, so should be given the same consideration as promotion and advertising strategies. A higher or lower price can dramatically change both gross margins and sales volume. This indirectly affects other expenses by reducing storage costs, for example, or creating opportunities for volume discounts with suppliers.
Some pricing strategies to consider are:-
Competitive pricing.
Use competitors' retail (or wholesale) prices as a benchmark for your own prices. Price slightly below, above or the same as your competitors, depending on your positioning strategies.
Cost plus mark-up.
This is the opposite of competitive pricing. Instead of looking at the market, look at your own cost structure. Decide the profit you want to make and add it to your costs to determine selling price.
Loss Leader.
A loss leader is an item you sell at or below cost in order to attract more customers, who will also buy high-profit items. This is a good short-term promotion technique if you have customers that purchase several items at one time.
Close out.
Keep this pricing technique in mind when you have excess inventor.
Membership or trade discounting.
This is one method of segmenting customers. Attract business from profitable customer segments by giving them special prices. This could be in the form of lower price on certain items, a blanket discount, or free product rewards.
Bundling and quantity discounts.
Other ways to reward people for larger purchases are through quantity discounts or bundling. Set the per-unit price lower when the customer purchases a quantity of five instead of one, for example. Alternately, charge less when the customer purchases a bundle or several related items at one time.
Versioning
Versioning is popular with services or technical products, where you sell the same general product in two or three configurations. A trial or very basic version may be offered at low or no cost, for example, with upgrades or more services available at a higher price.
Make smart use of these pricing strategies and your bottom line will soar!
By: Bobette Kyle
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