Managing proper pricing strategies are important for growth concerns of the business. A business should adopt particular pricing strategies in accordance with the market conditions, objectives of the business and needs of the customers.
Pricing can be defined as the process of determining what an organization will receive in exchange for the products it sells. It is important for you to manage your pricing strategies in allegiance with the requirements of business sector you are in, the markets in which you supply your products, the customers that you transact with and the objectives that you aspire for.
If you adopt effective pricing strategies, you become able to secure better market shares, leading to enhanced profits. Pricing, if managed effectively may also lead you towards market leadership.
Following are some of the pricing strategies that can be adopted in accordance with your business nature, whether you deal in wholesale supplies, retail items or self-manufactured goods.
Cost-plus pricing strategy is a safe approach of managing the prices of products. In this type of pricing, you need to calculate all the associated variable and fixed costs and a desired profit margin is then added to the calculated costs, which ultimately provides you the price of product. If your business is not in a condition of taking more risks, it is good for you to adopt this approach of pricing, as it allows you to recover all the related costs of your product, ultimately mitigating the risks of losses.
This strategy advertises products at prices that are surprisingly low for the customers. This pricing strategy allows you to offer products at lower prices as compared to your customers. When you offer your product at bait price, you make customers think that they are paying less for a product that costs more. This pricing strategy can be adopted in utterly competitive markets and it allows you to capture the attraction of buyers, with the ultimate impact of increasing your market share.
If your business is heading towards the launch of a new product that is already available in the market, it gets difficult for you to secure a reasonable market share. Customer loyalty, once developed, is difficult to exploit. Penetration pricing allows you to market your product at such a competitive price, through which you can secure some of the market share as well, exploiting the customer loyalty of your competitors. This strategy is effective in gaining the market share, whether you are a newbie retailer, a wholesale supplier or an entity directly involved in production of goods.
This pricing strategy can be adopted if you are delving into the market with a new and innovative product. Price skimming allows you to market your product at a reasonably high price, as initially you do not have competitors’ concerns. However, this is a short- term pricing strategy because of the gradual entrance of prospective competitors into the market, with their substitute products. The initial high price of the product needs adjustment in allegiance with the market conditions, for maintaining your market share.
Target pricing or market-based pricing strategy allows maintaining the price of your product in accordance with you target market. If you adopt this pricing strategy, you need to conduct a market analysis for scrutinizing the customers’ requirements and adjusting the prices accordingly, so that the quality and costs of the product could be managed in a way to fetch your customers and your profit figures. China is acknowledged for supplying wholesale products to various markets across the world and China also addresses these markets through target pricing.
These are some of the pricing strategies that you can adopt for different products, for gaining market shares and securing enhanced profit margins.